Banking  in  California 


1849-1910 


COPTRIGHTED    1910 

BENJ.    C-  WRIGHT 


San  Francisco  : 

H.  S.  Crocker  Company,  Printers 

1910 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/bankingincaliforOOwrigrich 


u.  c. 

ACADEMY   OF 

PACIFIC  COAST 

HISTORY 


asL/ 


Banking   in   California 


statehood  Features. 

California  is  characterized  by  many  important  features, 
some  of  which  are  quite  unique. 

It  is  the  first  and  only  one  of  the  public  land  States  to  be 
admitted  into  the  Union  without  previous  territorial  proba- 
tion. 

Thirty  States  preceded  her  into  such  admission,  the  last 
twelve  of  which  had  been  previously  classed  as  territories. 

Her  climatic  conditions  are  peculiar,  with  marked  divi- 
sions between  the  wet  and  dry  seasons,  the  prevalence  of  rain 
in  some  sections  in  the  winter  season  and  its  absence  in  other 
sections. 

It  was  the  first  State  to  uncover  gold  deposits  on  a  large 
scale,  and  to  assist  in  such  developments  in  adjacent  States 
and  Territories. 

It  was  the  first  State  to  discover  cinnabar  deposits  in  pay- 
ing quantity,  and  has  ever  since  been  the  country's  chief 
source  of  quicksilver  supply,  as  well  as  a  prominent  factor 
in  the  world's  supply  of  that  metal. 

It  has  long  been  distinguished  by  the  variety  of  its  soil 
and  mineral  products. 

In  addition  to  all  temperate  zone  fruits,  it  leads  all  other 
States  in  its  semi-tropical  and  tropical  varieties. 

It  has  a  record  for  the  finest  wheat  and  the  largest  barley 
crops  of  the  country. 

It  was  the  first  to  give  encouragement  to  the  beet  sugar 
industry  and  has  the  largest  beet  sugarie  in  the  Union. 

As  a  grape  grower,  raisin  maker  and  wine  producer  it  is 
without  a  rival  on  the  continent. 


6  Banking  in  California 

It  has  developed  an  earth  oil  product  that  is  now  second 
to  no  other  State,  and  is  being  equipped  with  pipe  lines,  refin- 
eries and  shipping  facilities  on  a  corresponding  scale. 

Its  list  of  manufactories  embraces  nearly  everything  pro- 
duced elsewhere  from  the  smallest  and  most  insignificant 
article  to  the  largest  and  most  costly. 

Its  contributions  to  the  United  States  Navy  have  been 
of  the  most  creditable  character. 

Its  people  have  shown  wonderful  recuperation  from  the 
most  disastrous  losses  by  fire  and  earthquake  ever  experienced 
in  the  United  States,  and  their  hospitality  on  all  occasions  is 
of  international  notoriety. 

Sound  Monetary  Standard. 

In  the  realm  of  finance  and  trade,  California  is  equally 
distinguished. 

Isolated  from  the  great  bulk  of  the  country's  population 
on  these  extreme  westerly  shores,  the  sudden  influx  of  a  large 
number  of  people  from  all  parts  of  the  continent  and  Europe, 
attracted  by  the  discovery  of  gold  deposits,  it  is  quite  natural 
that  the  self-reliance  factor  should  have  been  rapidly  devel- 
oped. 

At  that  time  the  whole  country  was  on  a  specie  basis, 
but  paper  money  was  the  principal  currency.  This  was  issued 
by  the  banks  under  State  laws,  in  no  two  of  which,  perhaps, 
were  the  provisions  for  such  issues  exactly  alike.  As  a  result, 
the  paper  money  was  of  variable  character — good,  bad  and 
indifferent,  some  of  it  being  received  only  at  a  heavy  discount. 

These  conditions  were  well  known  to  those  who  had  flocked 
to  this  Coast  and  were  appreciated  at  their  approximate  value, 
so  that,  by  the  time  the  people  were  ready  to  prepare  and 
adopt  a  State  constitution,  the  currency  problem  had  been 
practically  agreed  upon. 

^         The  organic  law  as  adopted  forbade  the  issue  of  bank 
/  notes  for  circulation  purposes,  thus  placing  the  financial  sys- 
tem of  the  State  on  a  hard  money  basis. 

This  action  was  unique.     It  was  a  step  entirely  outside 


Banking  in  California  7 

of  the  rules  governing  currency  matters  in  other  States  and 
Territories.  It  was  a  case  where  constructionists  did  much 
better  work  than  they  realized. 

This  was  in  1850,  when  the  census  gave  the  population 
of  California  at  92,597,  and  when  the  amount  of  money  of 
all  kinds  in  circulation  was  quite  small,  even  for  that  limited 
number. 

With  no  authority  to  issue  paper  money  of  any  kind 
vested  in  any  source,  with  the  nearest  mint  for  the  manufac- 
ture of  coined  money  three  thousand  miles  away,  with  no 
means  of  transportation  across  the  continent  except  by  steam- 
ers via  the  Isthmus  of  Panama  or  pony  express  via  St.  Louis, 
which  in  either  case  meant  a  delay  of  several  weeks,  it  looked 
as  though  a  great  mistake  had  been  made. 

But  for  one  single  circumstance  there  could  have  been 
no  other  conclusion.  It  would  have  been  suicidal  for  any 
State  at  this  extreme  end  of  civilization  not  having  that  one 
resource  to  have  taken  such  action. 

Primitive  Metallic  Currency. 

Fortunately,  California  had  the  raw  material  for  the 
manufacture  of  the  best  coined  money  the  world  has  ever 
known,  and  it  had  it  in  abundance.  It  abounded  in  the  river 
beds,  on  the  hillsides  and  in  the  hidden  rocks. 

To  use  this  raw  material  by  weight  as  a  means  of  ex- 
change was  the  first  resort. 

Assayers  were  at  hand  to  determine  the  fineness  and 
value  of  the  gold  dust  offered,  and  the  price  was  fixed  at  $16 
per  ounce.  This  rule  evidently  protected  the  buyer  from  any 
loss. 

This  was  a  novel  way  of  using  gold  dust  or  bullion,  but 
it  served  a  most  useful  purpose,  and  was  kept  up  for  some 
time,  at  least  in  a  limited  degree. 

Prior  to  the  establishment  of  a  branch  of  the  United 
States  Mint  in  this  city  in  April,  1854,  authority  was  secured 
for  the  private  coinage  of  gold  in  the  form  of  money.     The 


8  Banking  in  California 

$50  slugs  of  private  manufacture  and  smaller  denominations 
came  into  general  use. 

These  makeshifts  sufficed  for  a  stable  currency  for  local 
use  until  1854,  when  the  local  Government  Mint  commenced 
operations  in  limited  quarters  on  Commercial  street,  just 
west  of  Montgomery. 

While  the  pioneer  bankers  and  tradesmen  got  along  fairly 
well  with  the  use  of  gold  in  various  forms  as  currency,  the 
need  of  silver  currency  was  not  so  easily  supplied. 

For  gold  currency  there  were  Spanish  doubloons,  Ameri- 
can eagles  and  half  eagles,  private  mint  coins  of  those  denom- 
inations and  $50  pieces,  both  round  and  octagon,  slugs,  bars 
and  dust,  the  last  named  passing  as  money  at  so  much  per 
ounce. 

There  was  a  limited  amount  of  American  silver  coin  in 
circulation  in  the  form  of  half  and  quarter  dollars,  dimes 
and  half  dimes,  but  these  fell  far  short  of  the  requirements 
for  change  purposes  in  the  retail  circles. 

This  condition  was  seized  as  a  fine  opportunity  for  making 
a  little  profit  in  the  importation  of  foreign  silver  coins  of 
various  kinds. 

This  brought  into  local  circulation  the  pistareen  or  peseta, 
worth  19  cents,  from  the  Spanish  West  Indies  and  Peru. 
These  coins  readily  passed  for  25  cents,  a  profit  of  over  30 
per  cent. 

The  Spanish  real  of  12^/2  cents  was  accepted  for  a  value 
of  15  cents,  which  meant  a  profit  of  20  per  cent  to  the  im- 
porters. 

Encouraged  by  the  successful  circulation  of  these  two 
descriptions  of  foreign  silver  coin,  large  orders  were  sent  to 
India  for  rupees,  worth  43  to  44  cents,  and  about  the  size  of  the 
American  half  dollar,  for  which  they  were  used  as  a  substitute 
at  a  profit  of  14  per  cent. 

This  was  followed  by  an  importation  of  some  debased 
German  silver  coins  worth  16  cents,  which  were  passed  for 
25  cents,  netting  a  profit  of  50  per  cent. 

This  business  then  came  to  a  sudden  halt  by  the  action 


Banking  in  California  ^ 

of  the  bankers,  who  met  and  resolved  to  accept  these  foreign 
coins  only  at  their  bullion  value. 

About  that  time  Palmer,  Cook  &  Co.  took  in  a  large  sack 
of  Mexican  dollars,  paying  gold  for  the  same.  It  was  known 
that  some  of  these  coins  were  spurious,  but  that  made  no  dif- 
ference, as  silver  coin  was  scarce  and  people  were  not  very 
particular  about  the  standard  fineness. 

The  currency  question  gave  no  further  trouble  until  the 
outbreak  of  the  Civil  War,  when  the  Government  was  forced 
to  issue  its  paper  notes  to  carry  on  the  war. 

In  due  season  these  United  States  notes  found  their  way 
to  this  Coast,  and  were  for  a  time  put  into  circulation  to  a 
limited  extent,  but  generally  to  the  discredit  of  those  who 
paid  them  out. 

This  practice  was  frowned  upon  by  the  better  element 
of  the  population,  and  measures  were  immediately  taken  to 
put  an  end  to  it,  so  far  as  new  business  contracts  were  con- 
cerned. 

In  1863  the  Legislature  passed  the  Specific  Contract  Act, 
which  provided  that  payments  might  be  restricted  to  gold  coin. 

This  eliminated  United  States  notes  from  general  circula- 
tion in  this  State. 

This  law  was  assailed,  and  California  was  denounced  as 
being  disloyal  to  the  Government.  The  criticism  in  both  cases 
fell  flat  because  there  was  no  good  excuse  for  it  in  either  case. 

California 's  Gold  and  Public  Credit. 

The  discovery  of  gold  in  California  in  1848  was  certainly 
very  providential,  in  view  of  the  severe  test  of  Governmental 
credit  that  was  to  come  in  the  near  future. 

Prior  to  that  event  the  amount  of  specie  money  in  circu- 
lation varied  from  $16,000,000  to  $30,000,000.  That  was  a 
small  amount  of  hard  money  for  a  population  of  20,000,000, 
being  only  $1.50  per  capita  at  the  utmost. 

Immediately  following  the  uncovering  of  the  gold  deposits 
in  this  State,  the  metallic  money  supply  of  the  country  began 


10  Banking  in  California 

to  accumulate  most  rapidly,  advancing  from  $147,395,500  in 
1850  to  $253,601,600  in  1858. 

The  war  broke  out  in  the  spring  of  1861,  and  even  then 
there  was  estimated  to  be  only  $246,400,000  of  gold  and  silver 
coin  in  circulation. 

Soon  after  the  war  was  inaugurated,  specie  payments  were 
suspended  throughout  the  country,  and  all  the  coin  money 
in  the  Atlantic  States  was  shipped  out  of  the  country  or  was 
buried  from  sight. 

California  did  not  suspend  specie  payments  at  that  time, 
but  the  only  specie  in  circulation  was  about  $25,000,000,  all 
of  which  was  in  the  Pacific  States. 

This  State  was  a  large  producer  of  gold  all  through  the 
war  and  a  heavy  shipper  of  the  yellow  metal  to  the  Atlantic 
States.  What  she  did  in  that  line  during  that  interval  and 
previous  to  that  outbreak  helped  materially  to  sustain  the 
Government  credit. 

Without  this  bullion  bulwark  of  hundreds  of  millions, 
the  outcome  of  the  war  would  have  been  far  more  disastrous 
than  it  was,  bad  as  the  actual  results  were. 

In  this  way  California  showed  its  loyalty  to  the  Govern- 
ment more  forcibly  than  would  have  been  the  case  had  it 
followed  the  Eastern  States  in  suspending  specie  payments 
and  had  substituted  greenbacks  for  its  gold  currency. 

But  for  its  uncompromising  adherence  to  the  sound  money 
standard,  the  date  for  the  resumption  of  specie  payments  on 
the  other  side  of  the  country  would  have  been  delayed  to  a 
later  date  than  was  the  case.  It  took  courage  of  a  high  order 
to  pursue  this  course,  but  the  action  has  since  been  most  cor- 
dially approved. 

Trade  Dollar  Coinage. 

California's  attitude  on  the  silver  question  has  been  gen- 
erally commendable. 

From  the  time  the  relative  value  of  these  metals  of  gold 
and  silver  began  to  vary,  the  one  being  at  a  discount  or  at  a 
premium  with  the  other,  according  to  the  standpoints  of  dif- 
ferent classes  of  financiers,  the  people  most  directly  interested 


Banking  in  California  H 

in  their  production  have  sought  to  avoid  the  threatened 
estrangement. 

The  first  plan  suggested  was  the  free  coinage  of  trade  dol- 
lars for  export.  It  was  known  that  China  was  using  a  large 
amount  of  Mexican  dollars,  and  it  was  thought  that  an  Amer- 
ican silver  dollar  of  uniform  fineness  and  weight  might  in  time 
supplant  the  Mexican  dollar  in  Asia,  in  which  event  there 
would  probably  be  a  good  demand  for  the  surplus  silver  of 
the  Coast. 

The  trade  dollar  suggestion  is  credited  to  California.  It 
was  most  heartily  approved  by  Dr.  Linderman,  then  director 
of  the  United  States  Mint,  as  the  writer  knows  from  a  per- 
sonal interview  with  that  gentleman,  when  on  a  visit  to  San 
Francisco. 

Congress  subsequently  endorsed  the  measure,  and  about 
$36,000,000  in  these  coins  were  turned  out  from  1874  to  1879, 
most  of  which  were  sent  to  the  Orient. 

It  is  known  that  the  Chinese  are  slow  to  change  their  cus- 
toms, but  it  was  considered  that  good  progress  was  being  made, 
and  this  plan  of  disposing  of  the  surplus  silver  would  no 
doubt  have  been  eventually  successful  but  for  one  circum- 
stance. 

Local  depositors  of  silver  at  the  Mint  for  the  free  coinage 
of  the  same  into  trade  dollars  allowed  their  greed  for  gain  to 
get  the  better  of  their  judgment  and  began  to  pay  out  these 
dollars  for  domestic  circulation.  As  there  were  no  other  silver 
dollars  being  coined,  they  passed  from  hand  to  hand  quite 
readily  for  a  time. 

As  soon  as  the  Mint  authorities  learned  these  facts,  the 
coinage  of  the  dollars  was  omitted  for  a  time  and  shippers  to 
China  were  unable  to  fill  their  orders.  This  had  a  bad  effect 
in  China  and  virtually  killed  the  trade.  The  dollars  were  sub- 
sequently sent  back  to  this  country  and  redeemed. 

The  trade  dollar  was  never  designed  for  circulation  in 
this  country,  and  as  soon  as  tradesmen  in  California  under- 
stood this,  they  banished  the  coin  from  circulation  in  a  single 
day  by  the  refusal  to  accept  them,  except  at  a  heavy  discount. 


12  Banking  in  California 

Basis  for  Silver  Certificates. 

This  plan  of  disposing  of  the  surplus  silver  of  the  Coast 
States  having  failed,  another  was  suggested  by  a  local  banker, 
and  the  writer  incorporated  the  same  in  a  pamphlet  article,  a 
copy  of  which  was  ordered  to  be  placed  on  the  desk  of  every 
member  of  Congress. 

This  plan  provided  that  the  Government  should  take  the 
surplus  silver  bullion  at  its  market  price  in  gold,  issuing  ne- 
gotiable certificates  for  the  same  that  might  be  used  in  lieu 
of  other  forms  of  paper  money.  To  prevent  any  unloading 
of  silver  at  a  price  beyond  its  parity  in  gold,  the  Government 
was  to  reserve  the  right  to  become  a  seller  in  the  open  market 
at  any  time. 

It  was  thought  this  plan  would  give  a  steadiness  to  the 
market  price  of  fine  silver,  which  would  be  very  desirable  to 
producers,  as  it  would  enable  them  to  regulate  the  volume  of 
production  and  thus  ensure  a  fair  profit  on  the  capital  in- 
vested in  the  industry. 

The  advantage  of  this  plan  over  the  one  Congress  finally 
adopted  was  the  vast  sum  of  money  that  would  be  saved  in 
the  cost  of  coinage.  Besides,  the  warehousing  by  the  Govern- 
ment of  silver  bars  was  deemed  a  better,  safer  and  more 
economical  way  of  earing  for  the  country's  silver  than  in  the 
storage  of  coin  for  which  there  was  no  earthly  use  in  this  coun- 
try. Then,  again,  if  any  of  this  silver  was  eventually  to  go 
out  of  the  country,  the  bars  for  shipment  would  be  preferable 
to  coin. 

Despite  the  failure  of  Congress  to  adopt  this  plan,  the 
writer  believes  it  was  a  better  way  of  disposing  of  the  silver 
the  Government  has  taken  than  the  course  which  has  been 
pursued  of  compulsory  coinage. 

While  Californians  have  had  large  interests  in  silver  min- 
ing for  many  years,  they  have  not  allowed  that  fact  to  sway 
their  adherence  to  the  gold  standard  as  the  more  desirable 
monetary  basis  of  the  two  metals. 

This  unwavering  course  in  this  matter  has  no  doubt  had 


Banking  in  California  ^^ 

its  influence  on  the  minds  of  men  in  other  parts  of  the  coun- 
try. The  determination  of  the  Government  to  keep  all  its 
forms  of  money  on  the  gold  parity  has  been  an  important 
factor  in  maintaining  the  high  standard  of  prosperity  so  long 
enjoyed. 

News  of  Gold  Discovery. 

It  is  of  little  importance  to  know  who  was  the  first  person 
to  transact  a  banking  business  in  the  territory  now  and  for 
many  years  known  as  California. 

For  the  purpose  of  this  story  it  is  only  necessary  to  take 
up  this  question  in  connection  with  the  first  arrivals  of  gold 
seekers. 

While  James  W.  Marshall  has  been  credited  as  the  dis- 
coverer of  gold  in  this  State  in  January,  1848,  it  is  known  that 
the  yellow  metal  had  been  found  and  worked  many  years 
before. 

Had  there  been  at  that  time  the  same  means  for  dissemi- 
nating information  as  there  was  in  1848,  the  rush  of  gold 
seekers  would  have  commenced  much  earlier. 

It  is  a  fortunate  thing  for  this  country  that  no  such  means 
existed  in  the  seventeenth  or  even  in  the  eighteenth  century. 

It  took  several  weeks  to  inform  the  denizens  on  the  At- 
lantic side  of  the  country  of  Marshall's  discovery,  and  there 
was  a  still  further  delay  before  it  was  given  general  credence. 

But  as  in  all  ages  there  has  been  in  every  large  com- 
munity a  class  of  Micawbers — people  who  are  waiting  for 
something  to  turn  up  in  their  favor — there  was  an  immediate 
response  to  take  advantage  of  this  new  golden  opportunity. 

California  was  a  long  distance  from  the  bulk  of  the  coun- 
try's population,  and  the  means  of  transportation  were  slow 
and  limited. 

A  journey  to  this  land  of  gold  from  the  other  side  of  the 
country  meant  a  long  and  weary  tramp  overland  on  foot  or 
by  ox  teams  through  sections  inhabited  by  hostile  tribes  of 
Indians,  or  a  still  longer  journey  by  water  in  sail  vessels. 

But  a  large  army  was  soon  on  the  way  by  both  routes,  and 


14  Banking  in  California 

it  was  a  steadily  increasing  army  for  many  months  afterwards, 
as  a  still  wider  circle  became  informed  of  the  news  and  fur- 
ther confirmation  of  its  correctness,  in  connection  with  im- 
proved transportation  facilities. 

Rush  of  Gold  Seekers. 

A  Baltimore  paper  is  credited  with  having  made  the  first 
serious  mention  of  what  gold  seekers  were  finding  in  Cali- 
fornia.   This  was  in  September,  1848. 

Sail  vessels  of  all  classes  were  secured  and  berthed  for 
a  trip  to  San  Francisco  via  Cape  Horn.  Before  the  close  of 
January,  1849,  ninety  vessels  had  sailed  from  various  Atlantic 
ports  for  the  Pacific  Coast,  carrying  about  eight  thousand  pas- 
sengers, and  seventy  more  ships  had  been  engaged  to  follow. 

The  first  of  those  passenger  laden  ships  began  to  arrive  at 
San  Francisco  in  April,  1849.  Two  of  the  fleet  arrived  in  that 
month,  one  in  May,  eleven  in  June,  forty  in  July,  forty-three 
in  August,  sixty-six  in  September,  twenty-eight  in  October, 
twenty-three  in  November  and  nineteen  in  December,  making 
two  hundred  and  thirty-three  in  nine  months.  The  first 
steamer  with  passengers  from  New  York  arrived  on  February 
28,  1849. 

In  the  same  year  three  hundred  and  sixty  vessels  arrived 
from  other  ports.  These  arrivals  by  sea  brought  thirty-five 
thousand  people  to  San  Francisco,  in  addition  to  three  thou- 
sand sailors,  who  left  their  ships  for  the  gold  diggings. 

The  arrivals  overland  for  the  same  year  were  estimated  at 
forty-two  thousand.  The  population  of  the  State  at  the  close 
of  1849  was  estimated  at  one  hundred  thousand,  but  San 
Francisco's  population  of  that  total,  based  on  the  vote  polled 
in  the  November  election,  was  not  over  eight  thousand. 

There  were  no  gold  mines  in  San  Francisco,  and  the  mines 
were  the  objective  point  of  nearly  all  the  immigrants  to  this 
port.  This  accounts  for  the  comparatively  small  population 
in  San  Francisco  in  the  early  years  of  its  history. 

Many  who  upon  arrival  made  a  dash  for  the  gold  dig- 


Banking  in  California  ^-^ 

gings  subsequently  found  it  to  their  advantage  to  drift  back 
to  San  Francisco  and  embark  in  other  forms  of  business  or 
industries  for  making  the  fortune  that  all  were  so  eager  to 
obtain. 

Pioneer  Bankers  and  Merchants. 

The  large  number  of  persons  exclusively  occupied  in  the 
interior  of  the  State  in  the  search  and  production  of  gold 
made  San  Francisco  a  good  distributing  point  for  such  sup- 
plies as  were  needed  by  the  miners. 

As  a  result  of  these  conditions  business  in  San  Francisco 
became  quite  lively  and  profitable.  Speculation  became  ram- 
pant. The  arrival  of  a  ship  with  supplies  was  a  great  attrac- 
tion. Sometimes  these  ships  were  boarded  by  would-be  buyers 
before  they  dropped  anchor  and  whole  miscellaneous  cargoes 
were  purchased  with  as  little  ado  as  the  smallest  package  from 
a  retail  store. 

This  boom  in  business  in  San  Francisco,  in  connection 
with  the  large  and  almost  daily  remittances  of  gold  dust  and 
bullion  from  the  interior  brought  a  score  or  more  of  bankers 
and  money  changers  to  the  front  with  a  suddeness  that  would 
have  been  considered  startling  under  any  other  circumstances 
in  a  city  of  the  same  population. 

Most  of  those  who  took  to  banking  in  those  early  days 
in  San  Francisco  were  entirely  new  at  the  business,  but  that 
fact  did  not  cut  any  figure. 

It  seems  that  the  chief  essential  required  from  one  willing 
to  take  up  the  banking  business  at.  that  time  was  to  be  the 
owner  of  a  safe  in  a  well-protected  building.  Some  of  the 
more  prominent  merchants  had  such  safes  and  it  was  an  easy 
matter  to  add  the  burden  of  banking  to  that  of  merchandising 
under  the  same  roof  and  with  the  same  clerical  force. 

Some  of  these  early  bankers  were  assayers,  who  took  the 
dust  from  the  miners  in  exchange  for  drafts  on  Eastern  banks. 
The  volume  of  this  kind  of  business  was  quite  large. 

Express  companies  took  up  the  same  feature  of  banking, 
sometimes  taking  the  gold  at  the  point  of  production  in  ex- 


1^  Banking  in  California 

change  for  local  or  Eastern  drafts.  These  companies  had  supe- 
rior facilities  for  handling  this  kind  of  banking  business,  as 
in  the  distribution  of  miners'  supplies  they  penetrated  all 
the  populated  places  in  the  interior. 

Bankers  of  Forty-Nine. 

One  of  these  pioneer  bankers  was  Henry  M.  Naglee,  who 
was  in  the  field  as  a  banker  as  early  as  January  9,  1849.  For 
a  short  time  the  firm  name  was  Naglee  &  Sinton.  The  latter 
withdrew  after  a  few  months,  and  Mr.  Naglee  continued  in 
the  business  until  1851,  and  then  suspended. 

F.  Argenti  &  Co.  was  advertised  as  a  banking  firm  at  135 
Montgomery  street,  and  was  there  as  early  as  June,  1850. 

Burgoyne  &  Co.  was  located  at  165  Montgomery  street 
in  the  same  year,  having  opened  in  June,  1849. 

B.  Davidson,  an  agent  of  the  Rothschilds  of  London,  was 
located  at  135  Montgomery  in  September,  1849.  Subsequently 
the  firm  name  was  changed  to  Davidson,  Berri  &  Co.  This 
bank  did  a  considerable  business  and  remained  in  operation 
for  many  years. 

Thomas  G.  Wells  began  on  a  modest  scale  under  the  name 
of  Wells  &  Co.  in  October,  1849,  and  gained  the  confidence 
of  the  people  by  his  fair  dealing,  and  the  volume  of  his  busi- 
ness naturally  expanded.  However,  he  was  affected  by  the 
slump  in  1851  suspending  in  October  3d  of  that  year. 

James  King  of  William  started  as  a  banker  on  December 
5,  1849,  at  131  Montgomery.  Afterward  he  became  the  editor 
of  the  Bulletin,  and  as  such  started  a  vigorous  campaign 
against  the  criminal  element,  and  was  shot  down  on  Montgom- 
ery street,  near  Washington,  two  hours  after  the  appearance 
of  the  paper  containing  a  reflection  on  his  assailant.  The 
death  from  the  wound  a  few  days  later  brought  the  Vigilance 
Committee  into  existence,  and  a  great  reform  resulted. 

Drury  J.  Tallant  opened  business  as  a  banker  in  February, 
1850,  at  143  Montgomery,  corner  of  Clay.  Judge  Wilde  was 
afterward   associated   with   him,   when   the   firm  name   was 


Banking  in  California  17 

changed  to  Tallant  &  Wilde.  The  last  named  subsequently 
withdrew,  but  Mr.  Tallant  continued  the  business  under  the 
name  of  Tallant  &  Co.  The  bank  was  incorporated  in  1881  as 
the  Tallant  Banking  Company,  and  was  absorbed  by  the 
Crocker  National  Bank  in  1898.  The  bank  had  a  long  and 
honorable  career  from  the  start. 

Express  Banking. 

Between  1849  and  1852  five  express  companies  were  put  in 
operation  in  San  Francisco. 

These  were  Adams  &  Co.,  Page,  Bacon  &  Co.,  Palmer, 
Cook  &  Co.,  Todd  &  Co.  and  Wells,  Fargo  &  Co. 

Millions  upon  millions  of  gold  dust  and  bullion  were  han- 
dled by  these  companies  for  account  of  the  miners  and  parties 
interested  in  the  industry. 

Naturally  these  companies  did  considerable  banking  busi- 
ness of  a  certain  kind,  as  buying  bullion,  receiving  deposits, 
selling  drafts  on  all  parts  of  the  world  and  making  loans. 

These  companies  did  a  thriving  business  during  the  few 
years  that  the  first  four  were  in  operation,  and  turned  in 
large  profits  to  their  operators. 

Adams  &  Co.  were  first  in  the  field,  opening  their  business 
in  October,  1849.  Connections  were  promptly  established  with 
the  leading  mining  camps.  Assays  were  made  for  the  miners. 
Through  their  influence  private  coinage  of  gold  was  author- 
ized. 

In  1854  Adams  &  Co.  became  a  joint  stock  company  with 
a  capital  of  $2,000,000  and  an  express  business  that  was  said 
to  be  worth  $50,000  per  month. 

One  of  the  early  banking  firms  was  Drexel,  Sather  & 
Church.  It  is  reported  that  the  money  to  start  this  bank  and 
the  safe  in  which  it  was  being  brought  out  from  the  East, 
while  in  transit  on  the  Isthmus,  went  overboard  from  the  boat 
in  which  it  was  being  conveyed  on  the  Chagres  river,  but  of 
course,  was  recovered. 

The  business  of  this  firm  was  conducted  for  a  time  in  a 
building  supported  on  piles  on  the  corner  of  Washington  and 


^^  Banking  in  California 

Sansome  streets.  In  one  of  the  early  big  fires  this  building  was 
burned  and  the  safe  and  its  contents  went  into  the  bay,  from 
which  it  was  afterwards  found  and  raised. 

The  bank  was  then  moved  to  the  northeast  comer  of 
Montgomery  and  Commercial  streets,  where  it  remained  for 
many  years.  In  fact,  until  recently  that  corner  has  been  con- 
tinuously occupied  for  banking  purposes. 

Mr.  Drexel  did  not  remain  long  in  the  firm  and  Mr. 
Church  retired  later,  leaving  Pedar  Sather  to  carry  on  the 
business  until  it  was  incorporated  in  1887  as  the  Sather  Bank- 
ing Company. 

Other  Private  Bankers. 

James  S.  Hutchinson  was  connected  with  the  Sather  & 
Church  bank  from  the  start  and  for  many  years  afterward. 

In  the  early  days  the  wharf  at  the  intersection  of  Com- 
mercial street  with  the  bay  was  the  principal  landing  place 
for  the  river  and  bay  craft  of  all  descriptions.  This  wharf 
at  first  extended  from  Montgomery  to  Sansome  and  was  after- 
ward carried  to  Battery  street.  It  was  designated  the  long 
wharf,  though  its  entire  length  was  only  two  blocks,  and  the 
bank  of  Sather  &  Church  was  at  the  shore  end. 

The  river  steamers  used  to  arrive  at  this  wharf  in  the 
early  morning  hours.  Mr.  Hutchinson  slept  in  the  bank  build- 
ing, and  as  bank  hours  were  not  then  restricted  to  the  five  or 
six  hours  in  the  middle  of  the  day,  Mr.  Hutchinson  being  an 
early  riser  and  on  the  alert  for  business,  was  always  on  hand 
to  welcome  the  miners  as  they  came  up  the  wharf  with  their 
bags  of  gold  dust  to  be  exchanged  for  gold  coin.  In  this  way 
considerable  amounts  were  purchased  at  $14  per  ounce  before 
the  less  ambitious  had  breakfasted. 

The  Sather  Banking  Company  became  the  San  Francisco 
National  Bank  in  December  1,  1897,  and  in  July,  1910,  the 
last  named  was  absorbed  by  the  Bank  of  California  National 
Association. 

Other  private  banking  firms  were  Carothers,  McNulty  & 
Co.,  afterward  Carothers,  Anderson  &  Co.,  at  118  Montgomery. 


Banking  in  California  19 

Delessert,  Cordier  &  Co.  were  located  at  176  Montgomery ; 
Godeffroy,  Silem  &  Co.,  141  Clay;  Joseph  W.  Gregory,  155 
Montgomery ;  Robert  Rodgers,  143  Clay ;  G.  Frank  Smith,  San- 
some  and  Clay;  Lucas,  Turner  &  Co.,  Battery  and  Washing- 
ton; J.  B.  Timmerman  &  Co.,  Clay  and  Sansome;  Abel  Guy, 
131  Dupont;  Sanders  &  Brenham  and  California  Savings 
Bank,  129  Montgomery. 

J.  R.  Robinson  and  T.  L.  Smith  established  a  savings  bank 
in  February,  1851.  Another  private  savings  bank  went  under 
the  name  of  Dr.  A.  S.  Wright's  Miners'  Exchange  and  Sav- 
ings Bank.  This  bank  offered  18  per  cent  per  annum  for  de- 
posits, redeemable  at  pleasure.  Later  on,  depositors  found  out 
to  their  sorrow  that  * '  redeemable  at  pleasure ' '  referred  to  the 
receiver  and  not  to  the  depositors. 

New  Era  in  Banking. 

A  new  financier  entered  the  local  fraternity  in  the 
early  fifties.  He  had  some  steamboat  experiences  on  the 
other  side  of  the  continent  and  at  Panama,  at  which  latter 
place  he  had  been  in  the  employ  of  Garrison  &  Morgan,  who 
were  operating  a  line  of  three  steamers  between  Panama  and 
San  Francisco,  one  of  which  was  known  as  the  ''Uncle  Sam." 

This  man  was  sent  by  Garrison  &  Morgan  to  San  Francisco 
to  look  after  the  business  of  the  firm  at  this  end  of  the  route. 

Later  these  gentlemen  established  a  bank  in  San  Francisco 
under  the  firm  name  of  Garrison,  Morgan,  Fretz  &  Ralston. 
A  year  later  the  first  named  two  withdrew  while  the  last 
named  two  continued  to  carry  on  the  banking  business. 

The  business  was  conducted  by  Fretz  &  Ralston  until 
June  1,  1861,  when  Joseph  A.  Donohoe  became  associated  with 
Mr.  Ralston,  and  the  firm  name  was  Donohoe,  Ralston  &  Co. 
until  July  1,  1864,  when  it  was  dissolved. 

This  dissolution  was  immediately  followed  by  the  estab- 
lishment of  two  new  banks,  or  two  banks  under  new  names. 

William  C.  Ralston,  D.  O.  Mills  and  others  organized  The 
Bank  of  California  in  July  1,  1864,  as  a  joint  stock  commercial 
bank,  the  second  of  the  kind  in  the  State. 


20  Banking  in  California 

At  the  same  time,  the  private  bank  of  Donohoe,  Kelly  & 
Co.  was  formed. 

Both  of  these  banks  are  still  in  existence,  the  last  named 
having  been  incorporated  on  March  1,  1891,  as  the  Donohoe- 
Kelly  Banking  Company.  The  son  of  the  founder  is  now  its 
president. 

Upon  the  organization  of  the  Bank  of  California,  Mr. 
Ralston  naturally  carried  some  of  the  business  he  controlled 
into  the  new  enterprise,  and  for  this  he  was  paid  $50,000. 

The  new  bank  was  formally  opened  for  business  on  July 
5,  1864,  in  the  same  building  on  the  southwest  corner  of  Bat- 
tery and  Washington  streets,  where  Mr.  Ealston  began  his 
banking  career  in  1856 ;  so,  in  a  sense.  The  Bank  of  California 
can  date  its  beginning  from  that  year  and  from  that  corner. 

The  capital  of  The  Bank  of  California  was  fixed  at 
$2,000,000  with  the  privilege  of  increasing  to  $5,000,000.  The 
first  20,000  shares  were  apportioned  among  twenty-nine  gen- 
tlemen in  lots  of  50  to  2000  shares  each. 

The  three  gentlemen  taking  2,000  shares  each  were  D.  0. 
Mills,  W.  C.  Ralston  and  R.  S.  Fretz. 

Mr.  Ralston  presided  at  the  first  meeting  of  the  stock- 
holders, and  the  first  item  of  business  recorded  was  the  election 
of  Stephen  Franklin  as  secretary,  who  was  re-elected  annually 
afterwards  until  his  death.  D.  O.  Mills  was  chosen  president 
and  William  C.  Ralston  cashier. 

First  Bank  Center. 

Some  of  the  pioneer  private  banks  which  have  been  men- 
tioned were  not  always  in  business  at  the  locations  given,  but 
the  addresses  named  are  from  the  city  directories. 

The  confines  of  the  first  banking  center  of  San  Francisco 
were  quite  limited,  being  practically  restricted  to  a  square  of 
three  blocks.  The  boundaries  of  this  square  were  Washington 
and  California  on  the  north  and  south  and  Battery  and 
Kearny  on  the  east  and  west.  Two  of  these  blocks  were  cut 
by  two  narrow  streets  known  as  Commercial  and  Merchant. 


Banking  in  California  21 

Most  of  these  early  banks  were  located  on  Montgomery- 
Street  between  California  and  Washington. 

The  custom  of  allowing  one  hundred  numbers  to  the 
block  did  not  prevail  in  the  pioneer  days. 

Montgomery  Street  then,  as  now,  extended  from  Market 
on  the  south  to  Francisco  or  the  bay  on  the  north,  passing  over 
Telegraph  Hill. 

The  first  even  block  on  Montgomery  street  began  at  the 
point  where  it  was  intersected  by  Post  street.  The  numbers 
between  Pine  and  California,  three  blocks  from  Post,  were 
69  to  97;  from  California  to  Sacramento,  97  to  122;  from 
Sacramento  to  Commercial,  122  to  133;  from  Commercial  to 
Clay,  133  to  146 ;  and  from  Clay  to  Washington,  146  to  166. 

Sanders  and  Brenham  were  not  only  good  bankers,  but 
were  also  honored  in  other  ways.  Beverly  C.  Sanders  was  the 
collector  of  the  port  at  one  time  and  the  first  president  of  the 
San  Francisco  Gas  Company.  C.  J.  Brenham  was  prominent 
in  steamship  affairs  and  was  mayor  of  San  Francisco  in  1851 
and  1852. 

C.  K.  Garrison  of  the  bank  bearing  his  name  succeeded 
Mr.  Brenham  as  mayor  in  1853. 

E.  W.  Burr  was  not  only  one  of  the  early  bank  presi- 
dents, but  the  city  mayor  in  1856. 

Pioneer  Bank  Failures. 

The  first  serious  bank  troubles  in  San  Francisco  occurred 
in  1855.  Previous  to  that  there  had  been  some  failures, 
notably  in  1851,  but  none  of  a  general  character. 

The  failures  in  1855  started  with  the  suspension  of  Page, 
Bacon  &  Co.,  one  of  the  express  companies  that  had  been 
handling  a  large  amount  of  the  bullion  business  of  the  State. 

On  the  following  day  Adams  &  Co.,  controlling  another 
important  express  and  banking  business,  suspended. 

Palmer,  Cook  &  Co.,  also  in  the  express  and  banking  busi- 
ness, followed  in  the  wake  of  the  other  two. 

With  three  examples  of  this  sort,  it  is  no  wonder  that  the 


22  Banking  in  California  ^ 

smaller  institutions  took  shelter  behind  closed  doors.     There 
was  no  other  course  left. 

It  is  said  that  every  bank  in  the  city  was  obliged  to 
suspend  temporarily,  but  many  of  them  subsequently  reopened 
and  continued  as  before.  Page,  Bacon  &  Co.  was  one  of 
these  to  reopen,  but  it  soon  went  out  of  existence  under  a 
second  suspension. 

These  failures  were  a  greater  damage  to  San  Francisco 
than  any  one  of  the  big  fires  that  had  swept  over  it  up  to  that 
time,  or  perhaps  than  all  of  them  combined. 

Recovery  from  these  material  disasters  was  quick,  and 
the  new  improvements  were  of  a  more  substantial  character. 
The  losses  sustained  in  this  way  were  regarded  simply  as  mis- 
fortunes, for  which  no  one  was  particularly  to  blame. 

But  wholesale  bank  failures  mean  very  much  more  to  a 
community.  They  mean  a  loss  of  confidence,  the  basic  element 
of  all  ambition  and  of  all  enterprise.  There  is  some  com- 
pensation, or  may  be,  for  property  consumed  by  fire  or  other 
forms  of  destruction.  But  there  is  no  compensation  for  the 
loss  of  confidence. 

When  the  depositors  in  one  of  the  pioneer  savings  banks 
of  the  city  (so-called)  were  clamoring  for  their  money  while 
surrounding  the  brick  building  in  which  their  deposits  had 
been  placed,  the  officials  are  reported  to  have  told  them  that 
the  funds  so  received  had  been  invested  largely  in  the  struc- 
ture erected  for  the  uses  of  the  bank,  and  they  could  help 
themselves  to  their  share  of  the  bricks  in  the  building  before 
them. 

Banking  in  the  Interior. 

Thus  far  this  story  has  been  mainly  confined  to  the  bank- 
ing and  financial  operations  in  San  Francisco.  There  has 
been  a  good  excuse  for  pursuing  this  course.  The  city  had 
either  initiated  or  fathered  such  enterprises  for  the  whole 
State  during  the  first  few  years  of  its  occupation  by  the  gold- 
seekers. 

Up  to  this  time  no  bank  had  been  incorporated  for  the 


Banking  in  California  23 

transaction  of  a  loan  and  discount  business  in  any  part  of 
the  State,  that  class  of  the  business  being  left  to  private 
bankers. 

There  is  no  doubt  that  private  money  lenders  were  to  be 
found  in  most  of  the  large  mining  camps.  These  men  not 
only  loaned  their  own  money,  but  they  probably  received 
money  to  be  loaned  for  account  of  others.  They  also  sold 
drafts  on  San  Francisco  and  more  remote  points. 

Sacramento  had  one  or  more  bankers  of  that  sort.  One 
of  these  was  D.  O.  Mills,  whose  name  has  been  honored  in  all 
parts  of  the  country.  He  was  a  merchant  in  that  city  in  1849, 
and  did  some  banking  business  in  that  connection. 

In  the  fall  of  1850,  he  opened  a  private  bank  in  Sacra- 
mento. He  had  been  previously  engaged  in  banking  in 
Buffalo,  N.  Y.  Up  to  1852  the  firm  consisted  of  D.  O.  Mills 
and  his  cousin,  E.  J.  Townsend,  the  latter  owning  a  con- 
trolling interest  in  the  Merchants  Bank  of  Erie  County, 
Buffalo. 

The  latter  having  retired  in  1852,  Edgar  Mills,  brother 
of  D.  0.  Mills,  and  Henry  Miller  were  taken  into  the  partner- 
ship. 

In  June,  1872,  the  bank  became  the  National  Gold  Bank 
of  D.  O.  Mills  &  Co.,  and  in  September,  1883,  the  word  ''Gold" 
was  dropped  from  the  title,  as  all  gold  note  banks  adopted  the 
currency  system. 

In  October,  1903,  a  controlling  interest  in  the  bank  was 
sold  to  the  Bank  of  California,  but  the  heirs  of  the  founders 
still  hold  stock  in  the  bank. 

It  is  claimed  that  this  is  the  oldest  bank  in  continuous 
existence  in  the  State,  and  the  claim  appears  to  be  well 
founded.  A  photograph  of  the  building  occupied  by  the  D.  O. 
Mills  bank  in  1852  is  in  the  possession  of  the  bank,  and  the 
contrast  between  that  structure  and  some  of  these  now  serving 
as  bank  premises  is  remarkable.  An  illustration  of  this  1852 
bank  building  will  be  found  on  another  page. 


24  Banking  in  California 

An  Old  Draft  Honored. 

• 

An  incident  of  unusual  interest  in  connection  with  the 
D.  0.  Mills  bank  became  an  event  of  history  only  a  few  months 
ago  in  the  honoring  of  a  draft  issued  nearly  52  years  ago,  the 
original  and  duplicate  of  which  have  been  shown  the  writer. 

The  number  of  this  draft  is  7834.  It  was  drawn  at  Sac- 
ramento October  27,  1858,  by  the  bank  of  D.  O.  Mills  &  Co., 
and  reads : 

*'At  sight  of  this  First  of  Exchange  (second  impaid)  pay 
to  the  order  of  George  Gridley  one  hundred  dollars,  value 
received  and  charge  same  to  account." 

The  draft  was  made  payable  at  the  American  Exchange 
Bank,  New  York,  and  is  signed  D.  0.  Mills  &  Co. 

For  some  reason  Mr.  Gridley  never  presented  this  draft 
for  payment,  and  upon  his  recent  death  his  son  as  adminis- 
trator of  the  estate  found  the  same  in  the  bottom  of  an  old 
trunk. 

It  was  sent  to  New  York  to  be  cashed  by  the  American 
Exchange  Bank,  but  as  that  bank  had  gone  out  of  existence 
many  years  ago,  it  was  forwarded  to  the  D.  O.  Mills  Bank  in 
Sacramento. 

The  old  records  revealed  the  genuineness  of  the  draft  as 
an  existing  obligation,  and  it  was  promptly  paid  on  January 
25,  1910. 

The  world  lost  a  man  of  high  type  when  Mr.  Mills  passed 
away  a  few  months  ago  while  on  a  visit  to  his  summer  home 
in  California. 

A  story  characteristic  of  the  man  is  to  the  effect  that 
on  a  certain  occasion  when  the  municipality  of  San  Francisco 
was  facing  a  certain  need  with  an  empty  treasury,  it  was 
suggested  that  some  money  in  a  sinking  fund  could  be  used 
for  the  purpose.  The  suggestion  came  to  the  knowledge  of 
Mr.  Mills,  and  just  as  the  authorities  were  about  to  adopt  that 
course  by  a  formal  vote,  he  suddenly  appeared  in  the  meeting 
and  told  those  present  that  they  could  not  and  must  not  divert 
a  special  fund  in  that  way.    * '  Let  us  raise  the  money  to  meet 


Banking  in  California  25 

this  emergency,"  said  Mr.  Mills,  at  the  same  time  pledging  a 
good  contribution  for  the  object,  and  the  misappropriation 
was  defeated. 

Prominent  Pioneer  Banker. 

Another  of  the  pioneer  private  bankers  in  Sacramento 
was  B.  F.  Hastings.  It  is  probable  that  there  were  others  in 
that  city,  but  their  names  are  not  recalled.  Sacramento  was 
only  thirty  miles  from  Fort  Sutter,  where  Marshall  first  dis- 
covered gold,  and  it  was  a  prominent  distributing  point  for 
miner's  supplies,  as  steamers  were  in  frequent  communication 
with  San  Francisco  via  the  Sacramento  River. 

The  steamer  McKim,  which  arrived  here  from  the 
Atlantic  on  October  3,  1849,  was  the  first  of  the  kind  to  run 
regularly  between  San  Francisco  and  Sacramento.  She  made 
the  trip  of  120  miles  in  14  hours,  going  up  one  day  and  return- 
ing on  the  following  day.  The  fare  one  way  was  thirty  dollars. 
The  Senator  arrived  from  the  East  a  few  weeks  later  and 
alternated  with  the  McKim,  thus  establishing  daily  com- 
munication with  Sacramento, 

The  Low  Brothers  were  in  the  banking  business  at  Marys- 
ville  in  the  early  fifties.  F.  F.  Low,  one  of  these  brothers,  sub- 
sequently was  quite  honored  in  public  life  and  also  in  banking 
circles  in  San  Francisco.  He  was  for  several  years  one  of  the 
managers  of  the  Anglo- Calif omian  Bank  in  San  Francisco. 
He  was  also  Governor  of  the  State  for  four  years,  superintend- 
ent of  the  United  States  Mint  in  San  Francisco  and  Minister 
to  China. 

For  long,  varied  and  prominent  banking  service  the  late 
Norman  D.  Rideout  deserves  special  mention.  He  began  his 
career  in  the  northern  part  of  the  State  about  1850  and  con- 
tinued it  uninterruptedly  and  very  successfully  up  to  his 
death  in  1908. 

In  the  earlier  years  of  his  California  banking  experience, 
his  operations  were  confined  to  Yuba  and  Butte  counties,  where 
he  started  several  private  banks,  which  in  later  years  were 
incorporated.    Later  on  he  opened  a  bank  in  Auburn,  Placer 


26  Banking  in  California 

County.  He  was  also  interested  in  and  one  of  the  early 
directors  of  the  London  and  San  Francisco  Bank,  Limited, 
and  its  president  at  the  time  and  for  some  years  previous  to 
its  absorption  by  the  Bank  of  California  in  1905.  He  also 
organized  a  bank  in  Sacramento.  He  was  a  large  stockholder 
in  the  Mercantile  Trust  Company,  and  became  its  president 
in  1906,  and  held  the  office  until  his  death. 

Mr.  Rideout  had  many  thrilling  experiences  in  early 
years  as  the  custodian  of  gold  from  northern  points  to  San 
Francisco  over  stage  lines,  always  riding  on  the  box  with  the 
driver  and  armed  to  resist  attacks  from  highwaymen. 

Other  Country  Bankers. 

The  private  bank  of  W.  J.  P.  NichoUs  at  Dutch  Flat, 
Placer  County,  established  in  1860,  is  still  doing  business  as 
a  private  bank,  or  was  at  last  accounts. 

A.  B.  Carlock  opened  a  private  bank  at  Fort  Jones, 
Siskiyou  County,  in  1876,  and  took  out  incorporation  papers 
June  27,  1899,  as  The  Carlock  Banking  Company  with  a 
capital  of  $50,000. 

Decker,  Jewett  &  Co.  were  doing  business  as  private 
bankers  at  Marysville,  Yuba  County,  as  early  as  1858,  but 
incorporated  under  the  same  firm  name  November  1,  1888, 
with  a  capital  of  $150,000. 

James  H.  Goodman  &  Co.  opened  a  private  bank  at  Napa 
in  1858  and  successfully  operated  the  same  until  July  1, 
1889,  when  the  business  was  incorporated  under  the  same 
firm  name  with  a  capital  of  $300,000. 

Thomas  Alderson  was  doing  business  as  a  private  banker 
at  Placerville,  Eldorado  County,  as  early  as  1857,  but  incor- 
porated the  same  on  July  2,  1903,  under  the  name  of  the 
Alderson  Banking  Company,  with  a  capital  of  $30,000. 

A.  Mierson  opened  a  private  bank  at  Placerville  in  1861, 
and  continued  in  that  capacity  until  July  1,  1902,  when  he 
incorporated  as  the  A.  Mierson  Banking  Company,  with  a 
capital  of  $50,000. 


Banking  in  California  27 

A.  P.  Hotaling  started  as  a  private  banker  at  San  Rafael, 
Marin  County,  in  1871,  and  maintained  a  bank  of  that  char- 
acter until  1907,  when  that  bank  was  incorporated  as  the 
Hotaling  Banking  Company,  with  a  capital  of  $200,000. 

Oliver  Irwin  also  conducted  a  private  banking  business 
at  San  Rafael  for  some  time,  but  that  was  many  years  ago. 
It  was  known  as  the  Oliver  Irwin  Savings  Bank,  with  Oliver 
Irwin  as  president  and  his  son  of  the  same  name  as  cashier. 
Its  report  for  December  31,  1876,  showed  $10,000  due 
depositors. 

II.  M.  Gordon  &  Co.  conducted  a  private  bank  at  San 
Rafael  in  the  early  sixties,  and  at  a  much  later  perod.  On 
December  31,  1876,  it  reported  a  coin  capital  of  $61,700  and 
depositors  of  $104,200. '  Mr.  Gordon  was  president  and  R.  K. 
Weston,  cashier. 

E.  and  H.  Wadsworth  had  a  private  bank  at  Yreka, 
Siskiyou  County,  in  the  seventies. 

Better  Methods  of  Banking. 

It  took  some  time  to  clear  up  the  1855  bank  wreckage  in 
San  Francisco.  It  took  a  much  longer  period  to  restore  the 
public  confidence  in  banks  and  in  banking  methods. 

As  a  collapse  in  financial  institutions  as  managed  in  the 
crude  ways  of  early  days  was  bound  to  come  sooner  or  later, 
it  is  well  it  came  when  it  did.  Of  course  the  losses  were 
heavy,  and  much  suffering  followed  both  directly  and  indi- 
rectly. The  latter  was  especially  far-reaching,  extending  to 
all  forms  of  mercantile  and  industrial  efforts. 

Banks  are  a  great  help  to  business  when  properly  man- 
aged, and  a  great  hindrance  when  the  contrary  is  the  case. 

Except  for  sources  of  money  supply,  where  borrowers  can 
be  accommodated  on  reasonable  terms,  the  volume  of  business 
and  the  expansion  and  extension  of  commercial  and  industrial 
pursuits  of  every  character  would  be  greatly  curtailed. 

Of  course  there  is  a  vast  amount  of  business  transacted 
purely  on  credit,  but  there  must  be  some  ready  money  to 


28  Banking  in  California 

sustain  this  fabric  of  credit,  and  it  must  be  found  in  a 
concrete  and  available  locality  somewhere. 

The  banks  undertake  to  supply  this  need.  It  is  for  that 
object  they  are  organized,  and  it  is  for  that  purpose  they 
exist.  Under  faithful  management  they  meet  the  require- 
ments, and  prosperity  follows. 

The  failures  of  1855  in  San  Francisco  set  the  people  to 
thinking,  and  they  did  some  pretty  hard  thinking.  Experience 
is  a  trained  teacher  and  the  curriculum  is  very  exacting.  The 
outcome,  however,  is  ample  compensation. 

A  banking  system  for  California  was  the  outgrowth  of 
these  troubles.  If  there  had  been  any  adequate  system  prior 
to  that  event,  it  was  not  a  very  good  one,  as  if  even  approxi- 
mately good,  it  was  not  faithfully  administered. 

Even  an  inferior  banking  system,  if  rigidly  enforced,  is 
better  than  an  approximately  good  one  in  the  hands  of  care- 
less and  indifferent  executives.  It  is  not  likely  that  the  pioneer 
legislators  evolved  a  perfect  banking  system  for  the  State, 
but  they  made  a  beginning  along  that  line. 

First  Incorporated  Savings  Bank. 

The  oldest  incorporated  savings  bank  in  California  at 
this  writing,  if  not  the  oldest  banking  corporation  of  any 
class,  is  the  Savings  and  Loan  Society  of  San  Francisco,  which 
was  organized  in  July,  1857,  for  a  full  charter  term  of  fifty 
years. 

A  story  is  told  of  an  event  which  hastened  the  culmina- 
tion of  this  enterprise.  This  story  is  to  the  effect  that  a  gentle- 
man had  recently  arrived  from  the  East  with  the  view  of 
going  into  the  banking  business.  He  gave  publicity  to  that 
effect  on  the  billboards.  Finding  an  anticipated  rival  in  the 
field,  the  promoters  of  the  Savings  and  Loan  Society  hurried 
up  with  their  incorporation  papers  and  thus  perfected  their 
organization.  The  threatened  opposition  did  not  materialize 
at  that  time,  nor  at  any  subsequent  time  under  the  anticipated 
leadership. 


Banking  in  California  29 

The  bank  went  through  its  first  half  century  all  right.  At 
the  expiration  of  its  charter,  it  was  obliged  to  re-organize  in 
order  to  obtain  an  extension  of  existence.  This  it  did  by- 
prefixing  the  article  ' '  The ' '  to  its  previous  title. 

Had  the  amendment  permitting  renewals  of  charters  been 
adopted,  as  it  ought  to  have  been,  the  expense  and  delay  of 
re-organization  would  have  been  avoided.  Its  defeat  was  due 
to  an  impression  that  it  carried  a  renewal  of  franchises  of 
quasi-public  corporations  as  well  as  charters.  Subsequently 
the  amendment  w^as  adopted. 

The  bank  has  been  subjected  to  several  periods  of  general 
business  depression,  but  has  withstood  them  all  together  with 
two  or  more  foolish  runs  started  by  designing  or  ignorant 
people.  The  writer  distinctly  remembers  one  of  these,  and 
being  at  that  time  a  depositor  in  the  bank,  he  made  bold  to 
offer  a  fresh  deposit  while  other  more  excitable  depositors 
were  clamoring  to  get  their  money  out. 

The  bank  has  been  known  from  the  start  as  an  exclusively 
savings  bank,  and  has  been  prudently  and  conservatively 
managed.  The  stock  has  been  held  by  a  limited  number  of 
people,  with  but  few  changes  in  the  ofificial  staff,  and  these 
largely  confined  to  the  filling  of  vacancies  occasioned  by 
removal  from  the  city  as  by  death. 

Officials  of  Savings  and  Loan. 

The  first  president  of  the  bank  was  E.  W.  Burr,  who  at 
the  time  was  holding  the  office  of  mayor  of  the  city.  Mr. 
Burr  retained  his  position  in  the  bank  until  1880.  During  his 
incumbency  the  bank  attained  its  highest  degree  of  prosperity, 
which  was  followed  by  its  severest  trial,  incident  to  the  panic 
and  general  financial  stringency  of  1875  to  1878. 

The  first  semi-annual  report  of  the  bank  made  in  January, 
1858,  showed  deposits  at  the  close  of  the  first  half  year  of 
$20,100.  The  resources  increased  in  volume  from  year  to  year 
until  they  reached  the  large  total  of  $14,000,000  in  January, 
1875. 


30  Banking  in  California 

Upon  the  retirement  of  Mr.  Burr,  Judge  Samuel  Cowles 
became  president  and  held  the  office  until  his  death  about  two 
years  later. 

He  was  succeeded  by  John  Brickell,  who  remained  for 
only  a  short  time.* 

Horace  Davis  was  then  chosen  to  preside,  and  held  the 
position  until  he  was  elected  president  of  the  University  of 
California.  Mr.  Davis  also  served  a  term  in  Congress  as  the 
representative  of  the  San  Francisco  district. 

Samuel  Bigelow  succeeded  Mr.  Davis  as  president  of  the 
bank,  and  held  the  position  until  his  sudden  death  in  1903. 

Arthur  A.  Smith,  the  vice-president,  succeeded  Mr.  Bige- 
low, but  retired  in  1909  in  favor  of  George  D.  Greenwood. 
The  last  named  has  continued  in  the  office  ever  since. 

William  F.  Herrick  was  the  first  secretary  and  cashier, 
and  held  that  dual  position  for  four  years. 

Cyrus  W.  Carmany  succeeded  him  in  the  same  dual 
capacity,  and  remained  in  that  position  until  his  death  in 
1904.  His  long  connection  with  the  bank  in  that  active 
capacity  led  many  people  to  speak  of  the  bank  as  Carmany 's 
bank. 

Edwin  Bonnell  succeeded  Mr.  Carmany  in  1904,  serving 
in  the  same  relation  as  secretary  and  cashier  until  1908,  when 
the  positions  were  separated,  William  A.  Boston,  assistant 
cashier,  taking  the  place  of  cashier,  and  Mr.  Bonnell  continu- 
ing as  secretary.  Mr.  Bonnell  has  been  connected  with  the 
bank  for  about, forty  years. 

There  are  few  banks  in  California  where  the  leading 
officials  have  been  generally  favored  with  such  long  terms  of 
service.  This  may  be  considered  as  evidence  of  good  selec- 
tions in  the  first  place  and  faithful  service  on  the  part  of  those 
chosen  to  fill  the  respective  positions. 

Reorganization — Merger— Dividends. 

In  the  San  Francisco  bank  troubles  following  the  first 
one  of  these  failures  in  August,  1875,  the  Savings  and  Loan 
Society  underwent  its  greatest  test.    Few  banks  have  ever  sur- 


Banking  in  California  31 

vived  such  a  severe  strain.  In  two  years  the  deposit  with- 
drawals were  enormous,  but  they  were  all  met  dollar  for  dollar, 
leaving  a  large  cash  reserve  still  intact. 

In  addition  to  the  general  depression  which  prevailed  in 
the  City  and  State  at  that  time,  there  was  a  particular  feature 
that  affected  this  and  at  least  three  other  banks  in  the  city. 

This  was  the  large  loans  that  had  been  made  by  these 
banks  on  forged  paymaster's  vouchers.  The  Savings  and  Loan 
Society  was  the  heaviest  sufferer,  having  cashed  about  $240,000 
of  this  fraudulent  paper  by  accepting  the  same  as  good 
security  for  loans. 

The  alleged  author  of  this  forged  paper  was  George  M. 
Pinney,  a  clerk  in  the  Navy  Paymaster's  Department. 

At  least  two  of  the  other  local  banks  that  had  accepted 
these  vouchers  as  security  for  loans,  though  for  lesser  amounts, 
had  to  retire  from  business. 

In  the  early  part  of  1907,  through  the  purchase  of  a  large 
block  of  stock  by  William  H.  Crocker  and  his  friends,  the 
capital  of  the  bank  was  increased  from  $750,000  to  $1,000,000, 
and  new  life  was  infused  in  the  management.  This  was  fol- 
lowed by  a  re-organization  in  the  following  July  for  the 
renewal  of  the  fifty-year  charter  that  expired  that  month. 

The  bank  is  credited  with  putting  up  the  first  iron  front 
building  in  this  city  at  its  old  location  on  the  south  line  of 
Clay,  just  west  of  Montgomery.  All  but  the  first  story  of  its 
present  building  on  Sutter  and  Montgomery  was  destroyed 
in  the  fire  of  April,  1906.  Since  then  its  business  has  been 
transacted  in  the  restored  lower  story  of  that  structure. 

A  new  building  was  being  considered,  but  before  any 
plans  were  adopted,  a  proposition  was  submitted  for  a  merger 
with  the  San  Francisco  Savings  Union,  which  is  erecting  an 
elegant  steel  and  stone  building  at  the  northwest  corner 
of  O'Parrell  Street  and  Grant  Avenue.  Legal  steps  to  carry 
this  merger  into  effect  are  being  made. 

Since  the  opening  of  the  bank  in  1857,  the  dividends  paid 
depositors  aggregate  over  $17,400,000.  This  shows  how  one 
bank  has  helped  the  community  in  its  life  of  fifty-three  years. 


32  Banking  in  California 

Other  City  Savings  Banks. 

This  pioneer  institution  under  the  new  order  of  things 
did  not  have  the  field  to  itself  very  long. 

The  next  bank  to  divide  the  city  patronage  of  this  sort 
was  the  Hibernia  Savings  and  Loan  Society,  which  was  incor- 
porated on  April  7,  1859. 

Three  others  came  into  operation  in  the  following  three 
years.  There  were  the  French  Savings  and  Loan  Society  on 
February  1,  1860 ;  the  California  Building  Loan  and  Savings 
Society  on  May  31,  1861;  and  the  San  Francisco  Savings 
Union  on  June  18,  1862. 

Then  followed  an  interval  of  four  years  without  a  new 
organization  of  this  kind  in  the  city. 

The  Odd  Fellows  Savings  Bank  was  incorporated  on  Octo- 
ber 13,  1866.  This  was  the  first  bank  to  be  promoted  by  any 
of  the  fraternities,  and  it  started  with  a  show  of  popularity. 

The  Farmers  and  Mechanics  Savings  Bank  was  incor- 
porated on  June  30,  1867,  making  an  appeal  to  a  different 
class  of  clients. 

Two  other  similar  institutions  were  incorporated  in  1867, 
but  not  under  the  same  law  as  those  named  above.  These 
were  the  California  Trust  Company,  which  carried  both 
savings  and  commercial  departments,  though  not  separated 
from  the  trust  department,  and  the  City  Bank  of  Savings, 
Loan  and  Discount.  This  was  a  small  affair  and  attracted 
but  little  attention.  It  did  a  mixed  business  as  indicated  by 
its  title,  and  had  but  a  brief  existence,  leaving  few  to  mourn 
its  demise. 

The  German  Savings  and  Loan  Society  was  organized 
on  March  9,  1868,  and  immediately  came  into  favor  not  only 
with  the  large  German  population,  but  with  others  as  well. 

The  year  1869  was  quite  fruitful  in  developing  new 
banks  of  this  kind,  of  which  five  were  brought  forth. 

Two  of  these  were  small  affairs,  namely,  the  Cosmopolitan 
Savings  and  the  Dime  Savings.  Little  account  was  paid  to 
the  saving  of  dimes  in  California  in  1869. 


Banking  in  California  33 

The  Masonic  Savings  Bank  and  the  Humboldt  Savings 
and  Loan  Society  were  incorporated  in  November,  1869,  the 
former  on  the  4th  and  the  latter  on  the  24th. 

The  Pioneer  Bank  of  Savings  and  Deposit  was  organized 
in  April,  1869,  and  proved  attractive  to  those  who  were 
looking  for  big  returns  in  the  way  of  interest. 

The  Red  Men's  Savings  Bank  was  incorporated  on  May 

1,  1870,  but  did  not  commence  business  until  October.  This 
was  the  last  of  the  fraternity  banks  to  be  organized  in  this 
city.  The  prosperity  of  the  Odd  Fellows  and  the  Masonic 
was  undoubtedly  the  motive  for  launching  one  for  account 
of  the  Independent  Order  of  Red  Men.  The  incorporated 
capital  was  fixed  at  $500,000,  of  which  $30,000  was  paid  in 
at  the  start.  The  bank  received  deposits  as  low  as  25  cents 
and  made  no  charge  for  passbooks,  two  unusual  features  in 
those  days.  In  May,  1872,  the  bank  went  out  of  business  for 
want  of  adequate  support.  It  retired  honorably,  paying  every 
dollar. 

The  Security  Savings  Bank  was  incorporated  on  March 

2,  1871,  with  a  capital  of  $300,000,  of  which  $150,000  was 
paid  up  at  the  start.  The  present  capital  is  $500,000,  all 
paid  up. 

The  California  Savings  and  Loan  Society  was  organized 
on  June  24,  1873.    This  bank  made  interior  loans  a  specialty. 

The  Western  Savings  and  Trust  Company  was  incorpor- 
ated on  May  15,  1873,  but  it  never  gained  much  of  a  foothold, 
because  the  conditions  of  business  did  not  favor  any  more 
new  banks  just  then,  and  it  retired  without  being  mourned. 

There  were  no  savings  banks  started  in  San  Francisco  in 
either  1874  or  1875,  but  in  1876  the  Market  Street  Savings 
Bank  blossomed  forth,  but  did  not  meet  with  success,  and 
retired  from  the  field  in  the  latter  part  of  1877. 

In  1877  some  persons  not  altogether  satisfied  with  the 
management  of  the  French  Savings  and  Loan,  organized 
another  under  the  name  of  the  Franco- American  in  March  of 
that  year.  But  they  chose  an  unfavorable  time  for  the  enter- 
prise, because  of  the  impaired  confidence  in  such  institutions. 


34  Banking  in  California 

incident  to  recent  large  failures  in  the  city  and  elsewhere  in 
the  State.  The  project  was  abandoned  after  a  few  months, 
and  there  was  an  honorable  settlement  with  all  the  parties 
interested. 

Toward  the  close  of  that  year  things  were  not  as  pros- 
perous as  desired  at  the  Pioneer  Loan  and  Savings  Bank, 
generally  known  as  Duncan's  Bank.  Even  the  high  rate  of 
interest  paid  by  that  institution  failed  to  attract  the  usual 
volume  of  deposits. 

The  management  conceived  the  idea  of  having  a  feeder 
for  the  bank,  the  deposits  of  which  could  be  used  by  the 
Pioneer.  The  moment  this  idea  took  possession  of  the  fertile 
brain  of  the  manager  it  developed  rapidly,  and  so  he  concluded 
that  if  one  such  auxiliary  might  be  of  some  advantage,  it 
would  be  better  to  have  two  than  one. 

Having  come  to  this  conclusion,  he  hastily  arranged  the 
plans,  selected  dummy  directors  and  prepared  and  filed  the 
necessary  incorporation  papers. 

He  made  an  excellent  choice  of  titles  for  the  two  auxili- 
aries that  were  to  give  him  a  new  lease  of  prosperity.  One 
was  to  be  called  Fidelity  and  the  other  Union,  illustrating 
faithfulness  and  strength. 

The  Fidelity  Savings  Bank  was  first  launched,  and  busi- 
ness was  solicited  on  the  corner  diagonally  opposite  the 
Pioneer's  quarters.  The  Union  Savings  was  also  to  be  accom- 
modated in  the  same  building.  The  Fidelity  survived  just 
ten  days.  The  Union  was  still  born.  The  Pioneer  collapsed. 
Duncan  became  invisible. 

The  French  Savings  and  Loan  Society  of  1860  (Mutual) 
suspended  in  September,  1878,  and  a  new  French  Savings 
and  Loan  Society  was  incorporated  with  capital  stock  on 
March  10,  1879,  by  the  late  E.  J.  LeBreton  and  others.  This 
bank  undertook  the  liquidation  of  the  suspended  bank  of  the 
same  name,  and  the  work  was  performed  expeditiously  and  in 
a  satisfactory  manner. 

For  the  next  eight  years  there  was  nothing  doing  in  the 
way  of  organizing  savings  banks  to  operate  in  San  Francisco. 


Banking  in  California  35 

The  trials  of  1875  and  several  subsequent  years  were  too 
discouraging  for  any  attempts  of  that  character. 

In  May,  1888,  the  People's  Home  Savings  Bank  was  in- 
corporated by  parties  connected  with  the  Pacific  Bank.  Its 
first  statement  appeared  on  the  1st  of  the  following  July. 
The  paid-up  capital  at  that  time  was  $100,000  and  its  resources 
$208,800.  There  were  then  nine  of  these  banks  in  active 
operations  in  this  city  with  $2,326,230  paid-up  capital  and 
$66,279,400  in  deposits. 

In  November,  1889,  the  Mutual  Savings  Bank  was  started 
by  James  Phelan  and  his  friends  with  a  capital  of  $300,000. 

An  interval  of  over  three  years  elapsed  before  another 
bank  of  this  kind  was  started.  This  was  the  Columbus  Sav- 
ings and  Loan  Society,  which  wais  incorporated  on  January 
18,  1893.  This  was  the  first  distinctly  savings  bank  for  the 
local  Italian  colony. 

There  was  not  another  new  bank  of  this  kind  reported 
for  San  Francisco  for  upwards  of  ten  years. 

In  1904,  there  were  two  incorporated  for  doing  business 
in  this  city.  There  were  the  Mechanics  Savings  Bank  on 
January  21st  and  the  Scandinavian  Savings  Bank  on  Decem- 
ber 14th.  The  last  named  voluntarily  retired  a  few  months 
ago,  the  promoters  being  content  with  the  Merchants  National, 
which  practically  grew  out  of  the  Scandinavian  Savings. 

The  Mission  Savings  Bank  was  incorporated  on  August 
3,  1906,  by  parties  interested  in  the  Bank  of  California. 

The  Savings  and  Loan  Society  under  its  reincorporation 
obtained  a  charter  on  March  18,  1907,  thus  continuing  its 
previous  fifty  years  of  existence. 

There  has  been  no  new  savings  bank  for  the  city  since 
August,  1906. 

Interior  Savings  Banks. 

In  the  last  53  years,  28  savings  banks  have  been  incor- 
porated for  doing  business  in  San  Francisco,  exclusive  of 
some  that  did  not  materialize  sufficiently  to  claim  recognition. 
There  are  now  eleven  in  existence,  or  thirteen,  if  the  Mission 


^^  Banking  in  California 

and  Richmond  branches  of  the  German  Savings  and  Loan 
Society  are  to  be  included. 

All  the  others  have  disappeared  either  voluntarily  or 
through  insolvency.  Many  of  them  took  the  latter  course, 
leaving  a  host  of  indignant  sufferers  behind,  sadder  but  wiser 
for  their  experience. 

It  took  the  interior  of  the  State  ten  years  after  the  first 
incorporated  savings  bank  in  San  Francisco  had  commenced, 
to  realize  the  importance  of  such  institutions  in  all  the  larger 
communities. 

Sacramento  was  the  first  city  outside  of  San  Francisco 
to  seize  the  opportunity  of  organizing  a  bank  of  this  kind. 
This  was  the  Sacramento  Savings  Bank,  which  was  incorpor- 
ated March  19,  1867. 

Oakland  and  Stockton  followed  the  example  the  same 
year,  the  latter  organizing  the  Stockton  Savings  Bank  on 
August  12th  and  the  former  the  Oakland  Bank  of  Savings 
on  September  1st. 

Less  than  four  months  afterwards  the  San  Jose  Savings 
Bank  was  incorporated,  say  on  January  15,  1868. 

Three  more  of  these  banks  for  the  interior  came  forth  in 
1869,  as  follows:  Capital  Savings  Bank,  Sacramento,  on 
February  8th;  Marysville  Savings  Bank  on  April  18th,  and 
the  Union  Savings  Bank,  Oakland,  on  July  1st. 

The  five  organized  in  1870  were  the  Vallejo  Savings  and 
Commercial  at  Vallejo  on  May  1st;  the  Odd  Fellows  Bank 
of  Savings  at  Sacramento  on  May  11th ;  the  Petaluma  Savings 
Bank  at  Petaluma  on  November  2d;  the  Santa  Cruz  Bank  of 
Savings  and  Loan  at  Santa  Cruz  in  March ;  and  the  Alameda 
Valley  Savings  Bank  at  Alameda  in  July.  The  last  named 
never  became  active. 

In  1871,  the  Contra  Costa  Savings  and  Loan  Bank  at 
Pacheco  was  incorporated  in  January,  but  never  materialized 
in  that  line,  and  the  Napa  Valley  Savings  and  Loan  Society 
at  Napa  in  September. 

In  July,  1873,  there  were  incorporated  the  Dime  Savings 


Banking  in  California  37 

Bank   at    Sacramento    and   the    Farmers    Savings   Bank   at 
Modesto. 

In  1874  there  followed  the  Commercial  and  Savings  at 
San  Jose  on  May  13th,  the  Santa  Rosa  Savings  on  August  1st 
and  the  Farmers  Savings  at  Lakeport  on  December  14th. 

In  1875,  the  Merced  Security  Savings  at  Merced  went 
into  existence  on  March  11th.  First  report  from  the  Mendo- 
cino Bank  (Savings)  was  published  in  July,  1877. 

On  May  23,  1879,  the  People's  Savings  Bank  at  Sacra- 
mento was  incorporated. 

The  Stockton  Savings  Bank  was  organized  on  May  5, 
1883,  but  some  years  later  was  placed  in  the  list  of  commer- 
cial banks,  together  with  the  Stockton  Savings  and  Loan 
Society  at  the  request  of  the  managers.  These  banks  did  a 
mixed  business  at  the  time. 

In  1884,  the  Fresno  Loan  and  Savings  Bank  was  incor- 
porated in  January  and  the  Los  Angeles  Savings  of  Los 
Angeles  in  April. 

In  1885,  the  Southern  California  Savings  of  Los  Angeles 
and  the  San  Jose  Safe  Deposit  Bank  of  Savings  were  incor- 
porated, the  former  in  January  and  the  latter  in  April. 

In  1886,  San  Diego  incorporated  two  savings  banks,  one 
on  April  1st  and  the  other  on  May  15th.  The  latter  is  under- 
stood to  have  taken  the  place  of  the  former  and  made  its  first 
report  for  July  1,  1886,  under  the  name  of  the  Savings  Bank 
of  San  Diego  County. 

The  City  Savings  Bank  of  Santa  Cruz  came  into  being 
in  December,  1887,  and  the  Pajaro  Valley  Savings  and  Loan 
at  Watsonville  in  July,  1888.  There  have  been  some  others 
from  1880  to  1888,  both  years  inclusive,  but  they  are  not 
recalled. 

From  1867  to  1888,  both  years  inclusive,  there  were  thirty 
savings  banks  incorporated  to  do  business  in  the  interior  of 
the  State.  Two  of  these  never  developed  any  business.  Five 
at  least  were  transferred  to  the  commercial  class.  Others 
retired.  Since  1888  numerous  others  have  been  incorporated 
for  business  operations  in  the  interior  of  the  State. 


38  Banking  in  California 

At  least  nine  were  started  in  1889,  including  two  at 
Eureka,  two  at  Los  Angeles  and  one  respectively  at  Marysville, 
Modesto,  Santa  Ana,  San  Bernardino  and  San  Diego. 

Six  more  were  organized  in  1890,  eight  in  1891,  nine  in 
1892,  two  in  1893,  one  in  1895. 

There  was  but  little  done  in  this  business  for  the  next 
six  years. 

In  1901,  the  fever  to  organize  savings  banks  again  ap- 
peared, and  for  a  time  was  even  more  intense  than  before. 
There  were  six  of  these  banks  organized  in  that  year,  three 
in  the  following  year,  then  eleven,  then  fifteen,  and  finally 
twenty-two  in  1905,  making  forty-eight  in  three  years,  against 
thirty-three  in  the  four  most  active  years  previously  men- 
tioned. 

In  1906,  there  were  fourteen  more,  but  many  of  these 
were  never  developed  beyond  filing  the  papers,  and  perhaps 
not  even  to  that  extent.  Most  of  these  were  incorporated 
during  the  suspension  of  the  Act  creating  the  first  Board  of 
Bank  Commissioners,  and  pending  the  adoption  of  a  new  act 
perpetuating  that  system. 

At  the  end  of  December,  1906,  the  commissioners  received 
reports  from  115  savings  banks  from  cities  and  towns  in  the 
State  outside  of  San  Francisco,  against  fourteen  in  that  city. 

In  the  last  three  calendar  years  but  little  attention  has 
heen  given  to  these  movements.  The  largest  number  in  that 
interval  was  118,  while  the  last  report  of  the  commissioners 
for  April,  1909,  gave  the  number  at  117,  exclusive  of  the 
14  in  San  Francisco. 

How  distinctively  savings  banks  will  develop  in  the 
future  under  the  new  system  of  departmental  banking  remains 
to  be  seen.  Already  one  bank  that  has  claimed  that  distinc- 
tion has  given  notice  of  its  probable  retirement  in  the  near 
future. 

Mixed  banking  may  be  more  or  less  necessary  in  the 
smaller  communities,  where  there  is  not  enough  business  to 
support  a  single  class  bank. 


Banking  in  California  39 

But  under  the  system  in  operation  in  this  State  since 
July  1,  1909,  it  is  probable  that  most,  if  not  all,  new  organiza- 
tions for  banking  purposes  will  avail  themselves  of  all  the 
provisions  of  departmental  banking,  and  now  that  this  course 
has  been  adopted,  it  deserves  a  fair  trial. 

Value  of  Savings  Banks. 

Considerable  space  has  been  allotted  so  far  in  this  story 
to  the  incorporated  savings  banks  of  San  Francisco  and  also 
of  the  entire  State,  showing  the  development  of  these  institu- 
tions from  the  first  one  opened  in  July,  1857,  to  the  last  one 
reporting  to  the  late  B.oard  of  Bank  Commissioners  in  April, 
1909. 

The  subsequent  reports  of  these  banks  under  the  new 
system  which  went  into  effect  on  the  1st  of  July,  1909,  render 
comparisons  with  the  previous  system  impracticable. 

Up  to  April,  1909,  the  item  covering  savings  deposits  was 
restricted  entirely  to  the  banks  classed  as  savings  banks.  It 
was  true  then,  as  it  has  been  ever  since,  that  certain  commer- 
cial banks  carried  savings  deposits  on  which  interest  was  paid 
semi-annually,  but  such  deposits  were  not  segregated  from 
the  commercial  deposits  in  the  returns  made  to  the  Bank 
Commissioners. 

Under  the  new  system  of  departmental  banking,  savings 
deposits,  wherever  found,  are  reported  distinctly  from  com- 
mercial deposits  or  trust  funds. 

This  explains  why  the  progress  of  the  savings  banks  of 
the  State  has  not  been  carried  down  to  date  instead  of  being 
dropped  with  the  last  distinctive  office  report  in  April,  1909. 

Another  and  more  potent  reason  for  the  liberal  space 
accorded  these  institutions  is  the  great  importance  conceded 
to  them  so  generously  and  so  generally. 

Savings  banks  are  more  closely  in  touch  with  the  people, 
at  least  with  people  in  the  ordinary  walks  of  life  (and  they 
have  always  constituted  the  great  majority)  than  commercial 
banks  or  trust  companies. 

They  are  more  helpful  and  therefore  more  necessary. 


40  Banking  in  California 

They  help  a  large  class  that  sorely  need  that  kind  of  help. 
They  enable  every  bread  winner,  no  matter  how  small  may 
be  his  loaf,  to  become  a  banker  on  a  small  scale,  and  so  become 
of  service  to  others,  while  promoting  his  own  welfare. 

As  a  moral  agency,  the  savings  bank  is  a  power  that  can- 
not be  ignored  in  any  community,  no  matter  how  large  or  how 
small.  A  man  with  a  deposit  in  one  of  these  banks  is  a  better 
man  than  his  neighbor,  other  advantages  for  earning  money 
being  equal.  He  is  also  a  better  husband,  a  better  father,  a 
better  citizen,  and,  therefore,  a  better  person  in  all  the  varied 
walks  of  life,  social,  business  or  political. 

When  a  man  opens  a  deposit  in  a  savings  bank  with  the 
determination  to  add  to  the  same  as  frequently  and  generously 
as  circumstances  permit,  he  lays  the  foundation  for  the  better 
days  to  which  all  so  hopefully  look  forward. 

If  normally  developed  with  hands  and  brain  for  work,  the 
deposit  he  has  placed  in  the  savings  bank  is  a  new  auxiliary 
to  his  income  force.  The  additions  which  he  may  be  able  to 
make  to  that  account  will  gradually,  but  steadily,  make  that 
agency  a  greater  factor  in  contributing  to  his  revenue. 

It  will  be  a  shield  to  him  in  a  time  of  sickness,  accident, 
enforced  idleness,  or  other  disaster,  and  an  eJffectual  prop  in 
his  declining  years,  when  no  longer  able  to  do  a  strong  man's 
full  day  of  work. 

A  savings  bank  deposit  is  an  income  earner  whether  the 
claimant  is  sick  or  well,  at  work  or  idle,  awake  or  asleep.  It 
never  loses  its  earning  power  under  any  of  these  circumstances, 
but  continues  right  about  its  business  every  day  and  night, 
taking  no  account  of  the  numerous  holidays  or  even  Sundays. 

Deposits  in  savings  banks  have  made  many  homes  pos- 
sible that  would  never  have  come  into  existence  if  the  habit 
of  saving  which  they  seek  to  inculcate  had  not  been  adopted, 
and  faithfully  adhered  to  while  in  the  vigor  of  life. 

This  agency  has  not  only  been  helpful  along  this  line  to 
the  individual  with  the  deposit  account  to  draw  upon,  but  to 
others  who  have  no  such  source  of  money  supply. 


Banking  in  California  41 

Probably  it  will  never  be  known  how  many  vacant  lots 
have  been  covered  with  homes  or  other  structures  through 
the  use  of  money  collected  in  small  sums  from  thousands  upon 
thousands  of  individuals  who  are  regarded  as  just  ordinary 
people. 

If  the  facts  of  this  character  could  be  marshalled  with 
any  degree  of  accuracy,  they  would  be  an  astonishing  revela- 
tion, even  in  these  days  of  great  surprises.  There  is  no  hesita- 
tion in  saying  that  this  has  been  a  prominent  feature  in  the 
existence  of  savings  banks  the  world  over. 

Even  if  the  number  of  homes  created  in  this  way  were 
much  smaller  than  the  most  pronounced  pessimist  is  willing 
to  admit,  it  would  not  detract  in  the  least  from  what  has 
been  said  in  favor  of  this  agency.  Home  life  is  the  highest 
type  of  life,  and  the  newly  married  couple,  whether  young 
or  old,  that  cannot  claim  a  home  at  the  start  or  soon  after- 
wards, are  to  be  pitied.  Better  a  two-roomed  home  than  a 
twelve-roomed  flat  or  apartment  house. 

It  will  be  a  sorry  day  for  any  community,  large  or  small, 
that  succeeds  in  eliminating  the  distinctly  savings  bank  from 
its  midst.  There  is  a  place  for  such  banks  in  all  the  cities 
and  large  towns  throughout  the  country. 

It  is  evident  that  there  are  sections  that  would  have  been 
much  more  prosperous  if  they  had  given  hospitality  to  this 
feature  of  banking,  a  chief  factor  of  which  is  to  encourage 
thrift  among  the  working  classes.  The  absence  of  such  activi- 
ties in  rightful  measure  is  a  confirmation  of  this  view. 

In  these  days  of  specialties  in  all  the  leading  professions 
and  in  all  of  the  more  prominent  lines  of  business,  instead  of 
pursuing  a  course  that  may  eliminate  or  even  minimize 
specialties  in  banking,  they  should  be  encouraged  to  the  utmost 
limit  of  safe  and  successful  banking. 

The  family  physician  that  attends  to  all  the  ailments  of 
all  the  human  family  is  not  so  common  in  proportion  to  the 
population  as  he  was  fifty  years  ago,  while  the  number  of 
specialists,  on  the  same  basis,  is  much  larger. 


^2  Banking  in  California 

The  same  is  true  of  the  legal  profession.  The  division 
between  the  civil  and  the  criminal  practice  is  much  more 
clearly  marked  than  it  was  in  the  early  part  of  the  last 
century.  There  are  also  further  divisions  in  both  classes  of 
the  profession. 

There  is  even  a  more  natural  division  in  the  realm  of 
sound  banking.  The  line  between  savings  and  commercial 
banking  is  well  understood,  and  strict  adherence  to  it  should 
be  demanded. 

The  savings  bank  business  is  the  safest  form  of  banking. 
When  prudently  managed  by  competent  persons,  failure  is 
out  of  the  question,  or  at  least  next  to  impossible. 

An  investigation  of  savings  bank  failures  in  this  State 
as  well  as  elsewhere  shows  that  the  cause  of  embarrass- 
ment comes  from  a  departure  from  the  primary  work  of  such 
banks.  It  was  not  from  loans  on  real  estate  that  four  of  San 
Francisco 's  savings  banks  went  down  with  a  crash  some  thirty 
years  ago. 

If  California  savings  banks  had  not  undertaken  to  do  a 
commercial  bank's  work,  there  probably  would  have  been  no 
retaliation  on  the  part  of  the  commercial  banks. 

Hereafter  departmental  banking  is  to  have  the  right  of 
way.  The  theory  may  be  good,  but  the  practice  may  not 
always  be  in  accord  with  the  theory,  and  then  trouble  may 
follow. 

The  savings  bank  business  in  California,  in  incorporated 
form,  so  far  as  it  has  followed  primary  lines,  has  been  suc- 
cessful and  profitable,  a  credit  to  those  who  have  had  the 
management  of  the  same,  to  those  who  have  been  its  patrons 
from  either  side  of  the  counters  and  to  the  State  giving  the 
charters. 

From  a  single  bank  that  had  in  the  first  six  months  of 
its  history  gathered  in  sufficient  money  to  entitle  the  depositors 
to  a  credit  of  $20,000  on  its  books,  the  business  has  grown  to 
tremendous  proportions  in  a  little  more  than  a  half  century. 

The  writer  has  personally  watched  and  tabulated  this 


Banking  in  California  43 

growth  from  year  to  year  during  the  greater  part  of  that 
period,  and  hence  his  interest  in  the  progress  effected. 

This  progress  has  not  always  been  uninterrupted.  Con- 
ditions that  have  affected  the  general  development  of  the 
State  have  naturally  had  their  influence  on  the  banks.  Some- 
times these  adverse  conditions  have  been  climatic,  restricting 
the  volume  of  the  crops,  and  sometimes  of  a  speculative  char- 
acter, followed  by  general  depression  and  heavy  losses. 

Fires  and  earthquakes  have  been  contributory  causes  in 
the  derangement  of  business. 

Evil-disposed  persons  with  well  disguised  misrepresenta- 
tions have  sometimes  succeeded  in  temporarily  undermining 
confidence  in  financial  institutions,  resulting  in  heavy  with- 
drawals from  the  same. 

This  last-named  cause  is  the  most  indefensible  of  all, 
and  is  generally  attributable  to  those  who  have  had  nothing 
to  lose,  not  even  a  scintilla  of  manhood. 

Despite  all  these  and  other  untoward  circumstances,  the 
savings  banks  of  California  have  made  commendable  progress, 
both  in  the  number  of  these  institutions  and  in  the  volume 
of  their  business  transactions.  Beneath  all  the  difficulties 
encountered,  the  general  trend  has  been  upward  and  onward. 
They  are  still  moving  along  on  the  same  course. 

Deposit  accounts  are  considered  a  good  test  of  a  bank's 
popularity  and  prosperity.  The  size  of  these  accounts  indi- 
cates the  amount  and  quality  of  the  soil  on  which  they  must 
flourish  or  wither  and  die. 

Appended  will  be  found  the  amounts  to  the  credit  of 
depositors  at  the  opening  of  each  year  in  thousands  of  dollars. 
The  first  column  showing  the  savings  banks  of  San  Francisco, 
the  second  the  same  class  of  banks  in  the  interior  and  the  third 
the  total  in  the  State: 


44 


Banking  in  California 


Deposits  California  Savings  Banks. 

(OOO's  omitted) 


JAN. 

SAN 

JAN. 

SAN 

INTERIOR 

STATE 

INTERIOR 

STATE 

1 

FRANCISCO 

1 

FRANCISCO 

1858 

$        20 

$   20 

1884 

$  51,897 

$  8,027 

$  59,924 

1859 

96 

96 

1885 

52, 425 

6,718 

59, 143 

1860 

69 

69 

1886 

53,  487 

6,949 

60, 436 

1861 

1,135 

1,135 

1887 

57,  587 

8,609 

66.196 

1862 

2,952 

2,952 

1888 

63, 154 

11,051 

74,205 

1863 

2,944 

2,944 

1889 

69, 927 

12, 459 

82, 386 

1864 

3,858 

3,858 

1890 

79, 086 

14, 796 

93, 882 

1865 

5,163 

5,163 

1891 

88, 539 

18,  492 

107, 031 

1866 

7,393 

7,393 

1892 

97,601 

23, 182 

120, 783 

1867 

10,359 

10,  359 

1893 

107, 224 

28, 653 

135, 877 

1868 

17, 166 

$"'"206 

17, 365 

1894 

101, 463 

25,319 

126,  782 

1869 

22, 342 

1,475 

23,818 

1895 

100, 444 

25,074 

125,518 

1870 

26, 634 

2,259 

28,893 

1896 

105, 189 

28, 299 

133,  488 

1871 

31,290 

5,266 

36,556 

1897 

100,851 

26, 475 

127, 326 

1872 

37,033 

7,201 

44, 234 

1898 

105, 192 

29, 049 

134, 241 

1873 

42, 475 

8,956 

51,431 

1899 

110,002 

31, 178 

141, 180 

1874 

46, 971 

10, 862 

57,833 

1900 

115,588 

34,  318 

150,006 

1875 

55, 871 

14,022 

69,893 

1901 

124, 580 

39,  925 

164, 505 

1876 

56, 298 

13,765 

70,063 

1902 

133, 430 

46,  283 

179,  713 

1877 

59,621 

13, 922 

72, 543 

1903 

144, 296 

53,  754 

198, 050 

1878 

60, 631 

14, 024 

74, 655 

1904 

154, 907 

63,830 

218,  737 

1879 

45, 949 

11,897 

57, 846 

1905 

160,027 

74, 568 

234,  595 

1880 

42, 609 

9,258 

51,864 

1906 

169, 538 

91,756 

261,294 

1881 

42,323 

5,708 

49,031 

1907 

160, 965 

124,955 

285,920 

1882 

44,  914 

7,053 

51, 967 

1908 

147, 095 

115,394 

262, 489 

1883 

47,950 

7,274 

55, 224 

1909 

136, 533 

114,181 

250, 714 

Banking  in  California  45 

In  the  first  ten  years  of  this  period  banks  of  this  character 
were  confined  entirely  to  San  Francisco.  The  totals  for  1858 
and  1859  were  from  a  single  bank.  The  next  year  there  were 
two,  then  three,  then  four.  From  1863  to  1866,  inclusive, 
there  were  five,  and  in  1867,  six. 

In  1894,  the  number  of  reporting  city  banks  was  14. 
This  is  the  largest  number  that  ever  reported  at  the  beginning 
of  any  calendar  year. 

Owing  to  the  local  bank  troubles  of  1875  to  1879,  the 
number  was  reduced  to  8,  and  for  most  of  the  subsequent 
years  the  average  has  not  exceeded  9,  though  for  the  last  five 
years  there  have  been  12  to  14. 

The  first  report  from  the  interior  savings  for  January  1, 
1868,  was  from  three  banks.  Two  years  later  six  of  these 
banks  were  represented,  and  for  the  next  two  years  nine  for 
each.  By  the  1st  of  January,  1877,  there  were  sixteen  of 
these  banks  in  operation  in  eleven  cities  and  towns  in  the 
northern  end  of  the  State. 

Between  1878  and  1884,  there  was  quite  a  weeding  out 
of  these  banks  in  the  interior.  Three  of  them  suspended,  two 
went  into  liquidation  and  four  gave  up  their  savings  depart- 
ments. 

This  left  only  seven  in  operation  on  the  1st  of  January, 
1884.  One  of  the  suspended  banks  had  its  business  taken 
over  by  a  new  organization.  A  second  bank  was  put  into  the 
field  at  Stockton  and  a  new  one  went  into  business  at  Fresno 
on  January  24,  1884.  On  the  1st  of  July  following,  ten 
interior  banks  reported  paid-up  capital  of  $1,835,000,  reserves 
of  $345,500,  deposits  of  $6,667,900  and  resources  of  $9,138,500. 

Up  to  January  1, 1884,  there  was  not  a  single  incorporated 
savings  bank  in  any  part  of  the  State  south  of  Santa  Cruz. 

The  first  break  in  that  condition  of  things  happened  in 
April,  1884,  when  the  Los  Aligeles  Savings  Bank  was  incor- 
porated with  a  capital  of  $100,000.  I.  W.  Hellman  was  one 
of  the  directors.  The  first  president  was  L.  C.  Goodwin  and 
J.  B.  Watchtel  was  the  first  secretary  and  cashier. 


^6  Banking  in  California 

The  Los  Angeles  Savings  Bank  continued  in  business  for 
about  twenty-two  years,  when  it  was  absorbed  by  the  Security 
Savings  which  had  been  incorporated  after  the  former  started. 

In  August,  1900,  these  two  banks  stood  neck  and  neck  as 
the  leading  banks  of  that  character  in  Los  Angeles.  Each 
reported  $100,000  as  paid-up  capital.  The  Los  Angeles 
reported  deposits  at  that  time  of  $2,168,000  and  resources  of 
$2,297,000,  while  the  security  reported  $2,183,000  in  deposits 
and  $2,345,000  in  resources. 

At  that  time  there  were  only  seven  of  these  banks  in  that 
city.  The  security  was  slightly  in  the  lead  then,  and  since 
then  has  made  rapid  progress.  In  its  report  to  the  Commis- 
sioners for  July,  1908,  its  resources  were  nearly  $20,000,000, 
while  the  German-American,  the  next  largest,  reported 
$11,000,000.  There  were  then  fourteen  of  these  banks  in 
operation  there,  including  three  branches  of  two  of  the  main 
banks. 

City  Private  Banks  of  Later  Date. 

After  the  financial  troubles  in  San  Francisco  in  1854 
and  1855,  in  addition  to  the  few  private  banks  that  survived 
that  trial,  others  of  the  same  character  were  added. 

These  embraced  Banks  &  Co.,  Belloc  Freres,  Donohoe, 
Kelly  &  Co.,  Hentsch  &  Berton,  Hickox  &  Spear,  Daniel 
Meyer,  Lazard  Freres,  Parrott  &  Co.,  Seligman  &  Co.,  Shep- 
perd  &  Menzies,  John  Sime  &  Co.,  Sutro  &  Co.,  N.  Luning, 
Henry  Bainbridge,  Reynolds,  Reese  &  Co. 

The  dates  when  these  firms  first  began  doing  business  in 
the  city  are  not  remembered,  but  they  were  all,  with  possibly 
one  exception,  serving  the  people  in  the  early  sixties. 

Just  when  and  how  all  of  them  ceased  doing  business  as 
private  bankers  in  the  city  is  not  recalled  as  to  some  of  them. 

Banks  &  Co.,  Hickox  &  Spear  and  John  Sime  &  Co.  are 
known  to  have  failed,  the  first  named  in  1870  and  the  last 
named  about  the  1st  of  October,  1871.  Some  of  the  other  firms 
suspended  in  1878. 


Banking  in  California  47 

Lazard  Freres  founded  the  London,  Paris  &  American 
Bank  by  royal  charter  in  January,  1884. 

The  firm  of  J.  Seligman  &  Co.  promoted  the  Anglo-Cali- 
fornian  Bank,  Limited,  in  April,  1873. 

The  business  of  Parrott  &  Co.  was  merged  with  the  Lon- 
don and  San  Francisco  Bank,  Limited,  in  January,  1871. 

Donohoe,  Kelly  &  Co.  continued  as  private  bankers  until 
the  incorporation  in  March,  1891,  since  when  the  business  has 
been  continued  under  the  corporate  name  of  the  Donohoe-Kelly 
Banking  Company.    Daniel  Meyer  continues  in  business. 

The  other  firms  are  understood  to  have  voluntarily  dis- 
continued their  banking  business  in  the  seventies. 

Some  of  the  firms  named  did  a  large  business  as  private 
bankers.  This  was  particularly  the  case  with  Donohoe,  Kelly 
&  Co.,  Lazard  Freres,  Parrott  &  Co.,  J.  Seligman  &  Co.  and 
John  Sime  &  Co.  John  Parrott  had  been  previously  in  busi- 
ness in  Mexico. 

The  month  before  John  Sime  &  Co.  suspended,  the  firm 
returned  for  internal  revenue  taxation  an  average  capital  of 
$114,300  for  the  month  and  average  deposits  of  $289,100. 

Hickox  &  Spear  made  a  specialty  of  buying  and  selling 
greenbacks  during  the  war,  and  many  years  afterwards. 

First  Incorporated  Commercial  Bank. 

The  oldest  chartered  commercial  bank  in  California  (now 
no  longer  in  existence)  was  the  Pacific  Bank  of  San  Francisco, 
which  was  established  in  1863,  the  outcome  of  a  financial 
organization  of  another  name  incorporated  in  February,  1862. 

Peter  H.  Burnett,  first  Governor  of  California  after  its 
admission  into  the  Union,  was  the  first  president.  He  was 
succeeded  by  R.  H.  McDonald,  who  held  the  position  for 
many  years,  and  was  still  at  the  head  when  the  bank  suspended 
on  June  22,  1893,  during  a  bank  panic  that  swept  the  entire 
country. 

A  statement  of  this  bank  for  January  1,  1890,  showed 
resources  of  over  $5,000,000.  The  paid  up  capital  at  that  time 
and  for  some  years  previously  was  $1,000,000,  with  a  surplus 


'^S  Banking  in  California 

fund  of  $758,600  and  deposit  of  $2,207,800.  It  then  claimed 
a  volume  of  business  of  $225,000,000  per  annum.  At  the 
time  of  the  suspension  the  liabilities  were  placed  at  $1,855,000. 
About  80  per  cent  paid  to  creditors. 

The  only  other  incorporated  banks  doing  business  in  San 
Francisco  at  the  time  the  Pacific  Bank  entered  the  field  were 
the  Bank  of  British  Columbia,  incorporated  by  royal  charter 
in  1862,  The  Bank  of  British  North  America,  incorporated 
by  royal  charter  in  1840.  These  banks  were  simply  branches 
of  the  above  named. 

Wells,  Fargo  &  Co.,  incorporated  under  the  laws  of  Colo- 
rado, was  also  in  the  banking  business  here  at  that  time,  and 
had  been  so  engaged  from  1852. 

The  Bank  of  California  was  incorporated  in  June,  1864. 
by  W.  C.  Ealston  and  his  friends.  Mr.  Ralston  had  been 
previously  doing  the  business  of  a  private  banker  here  since 
1856.  D.  0.  Mills  was  the  first  president  and  W.  C.  Ralston, 
cashier. 

The  bank  was  prosperous  from  the  start,  and  its  undivided 
earnings  were  reported  at  $1,000,000  in  less  than  two  years 
after  the  doors  were  opened  for  business.  In  1866,  the  capital 
was  increased  from  $2,500,000  to  $5,000,000,  and  dividends  at 
the  rate  of  1  per  cent  per  month  were  immediately  paid  on 
the  increased  capital  and  for  many  years  afterwards. 

Business  was  suspended  in  August,  1875,  but  resumed  in 
the  following  October,  of  which  more  will  be  said  later. 

The  London  and  San  Francisco  Bank,  Limited,  was  incor- 
porated in  England  in  1865,  and  was  first  located  on  the  east 
line  of  Montgomery,  just  north  of  California.  Milton  S. 
Latham,  once  Governor  of  California,  was  president  for 
several  years,  and  was  followed  by  Camillo  Martin,  Arthur 
Scrivener,  Mr.  Steele  and  William  Mackintosh. 

First  Trust  Company — Liquidation. 

The  building  on  the  northwest  corner  of  California  and 
Leidesdorf  streets,  now  owned  and  occupied  by  the  San  Fran- 
cisco National,  was  erected  by  the  London  and  San  Francisco 


Savings  Union   Banl<:,    San   Francisco,    1857-1862 


Banking  in  California  49 

Bank  about  1870,  and  was  then  regarded  as  one  of  the  finest 
and  most  substantial  on  the  street.  It  withstood  the  ravages 
of  the  big  fire  of  April,  1906,  in  a  creditable  manner. 

The  business  of  the  London  and  San  Francisco  Bank, 
Limited,  was  taken  over  by  the  Bank  of  California  in  1905. 

The  California  Trust  Company  was  organized  in  Novem- 
ber, 1867,  incorporated  in  January,  1868,  and  opened  for 
business  in  the  following  May  with  an  authorized  capital  of 
$1,000,000,  of  which  only  the  first  installment  of  $12,500  had 
been  paid  up.  By  the  close  of  1869,  the  paid  up  capital  was 
$250,000,  and  by  April  1,  1875,  there  was  $500,000  paid  up. 

The  new  issue  of  stock  was  sold  in  lots  of  $50,000  at 
intervals  and  at  premiums  varying  from  25  to  45  per  cent 
above  par  value.  These  premiums,  amounting  to  $87,500,  all 
passed  to  reserve  fund. 

Dividends  of  1^/4  per  cent  per  month  were  inaugurated 
in  January,  1869.  Net  profits  for  1870  were  $99,172  and  for 
1871,  $145,263. 

In  May,  1872,  the  California  Trust  Company  was  re- 
incorporated as  the  National  Gold  Bank  and  Trust  Company 
with  a  capital  of  $1,000,000  by  capitalizing  $200,000  of  its 
surplus  and  calling  in  $300,000  of  new  money.  In  this  way 
stockholders  received  full  paid  shares  at  a  cost  of  $60  per 
share. 

The  regular  monthly  dividends  of  1  per  cent  were  con- 
tinued up  to  August,  1875,  the  total  aggregating  811/4  per  cent. 

In  the  bank  trouble  of  August,  1875,  the  bank  was 
obliged  to  close  its  doors  temporarily,  but  resumed  business 
in  June,  1876. 

In  March,  1875,  the  resources  of  the  bank  were  $6,290,500 
and  the  deposits  $4,203,900.  On  June  30,  1876,  just  after 
business  had  been  resumed,  the  resources  were  $1,363,400. 
The  capital  being  impaired,  a  reduction  of  25  per  cent  was 
made. 

In  January,  1878,  dividends  were  resumed  at  the  rate  of 
9  per  cent  per  annum,  but  subsequently  reduced  to  8,  the  last 


^^  Banking  in  California 

being  paid  in  January,  1879,  and  on  the  1st  of  September 
following,  the  bank  went  into  voluntary  liquidation. 

Up  to  the  first  suspension,  the  bank  had  been  steadily 
growing  in  popular  favor,  and  it  had  a  large  clientele,  though 
not  of  the  more  wealthy  class. 

On  the  day  that  the  bank  went  into  liquidation,  the 
account  between  the  stockholders  and  the  corporation  stood 
as  follows : 

Capital  paid  up  April  1, 1871 $    500,000 

Surplus  capitalized 200,000 

New  capital  paid  in 300,000 

Total  paid-up  capital $1,000,000 

Capital  written  off  October  5,  1876 250,000 

Total   capital $    750,000 

Cash  dividends  to  January,  1879 642,500 

Stock  dividend  1872 200,000 

Total  dividends $    842,500 

Depositors  were  paid  in  full.  The  original  stockholders 
also  got  their  money  back,  having  never  paid  in  but  $800,000, 
while  receiving  back  $842,000  in  stock  and  cash  dividends. 

Of  the  $750,000  of  capital  at  the  time  of  liquidation, 
stockholders  received  $303,750  in  eight  dividends  from  1879 
to  1883. 

The  bank  had  only  three  presidents.  Henry  L.  Davis  was 
the  first,  retaining  the  office  until  November,  1875,  and  resum- 
ing it  in  1879,  when  the  liquidation  began.  The  two  inter- 
mediates were  M.  Lynch  and  C.  H.  Burton. 

The  Merchants  Exchange  Bank  was  incorporated  in 
October,  1870,  with  a  nominal  capital  of  $500,000,  and  with 
Alvinza  Hayward  at  the  head.  The  bank  went  into  liquida- 
tion in  1878  and  is  still  in  liquidation  incident  to  the  manage- 
ment of  a  lumber  interest. 


Banking  in  California  51 

Advent  of  New  Banking  System. 

The  First  National  Gold  Bank  was  organized  in  Novem- 
ber, 1870,  but  did  not  go  into  business  until  January,  1871, 
and  did  not  receive  its  notes  for  circulation  until  the  following 
March. 

Back  of  this  organization  there  is  a  little  history.  Cali- 
fornia bankers  had  been  criticised  for  their  refusal  to  organize 
national  banks  and  handle  a  paper  currency  of  variable  value. 
In  reply  they  said,  ' '  Give  us  a  paper  currency  redeemable  in 
gold  coin,  and  we  will  give  hospitality  to  the  national  bank 
system. ' ' 

After  much  discussion,  Congress  passed  a  special  Act 
authorizing  the  issue  of  $45,000,000  in  gold  notes  redeemable 
in  gold  coin  by  the  issuing  bank  upon  demand.  This  was  a 
special  concession  to  California.  Some  Boston  parties  applied 
for  the  privilege  of  organizing  such  a  bank,  but  not  one  ever 
went  into  operation  on  the  other  side  of  the  country. 

The  First  National  Gold  Bank  of  San  Francisco  was  the 
first  of  the  kind  to  go  into  business,  and  it  is  still  in  operation, 
having  been  quite  successful  from  the  start.  The  first  divi- 
dend was  paid  in  January,  1872,  at  the  rate  of  1  per  cent  per 
month,  but  since  1875  the  rate  generally  has  been  10  per  cent 
per  annum,  with  bonus  dividends  at  Christmas  on  several 
occasions. 

The  first  president  was  George  A.  Hooper.  Probably  the 
longest  term  as  president  was  held  by  S.  G.  Murphy.  For 
the  past  few  years  Rudolph  Spreckels  has  held  that  position. 
The  official  longest  in  the  service  of  the  bank  is  James  K. 
Lynch,  who  now  fills  the  office  of  vice-president. 

The  Grangers  Bank  was  incorporated  in  August,  1874. 
The  bank  was  the  outcome  of  the  Granger  movement,  which 
became  prominent  in  California  in  1873.  The  Granger  craze 
sought  to  do  away  with  middlemen  in  the  handling  of  their 
produce.  The  experiment  was  tried  on  a  large  scale  in  the 
shipment  of  California  wheat  to  Europe,  the  farmers  securing 
ships  and  loading  them,  the  cargoes  to  be  sold  on  the  way  out 


52  Banking  in  California 

or  upon  arrival.  The  scheme  was  a  failure,  as  was  predicted 
by  the  worldly  wise  men  of  the  times. 

The  Grangers  Bank  had  a  fairly  successful  run  for  some 
years  under  the  energetic  management  of  A.  Montpellier,  but 
was  eventually  obliged  to  close  its  doors.  The  bank  paid  a 
dividend  of  7%  per  cent  the  first  year  and  the  second  year 
10  per  cent.    It  went  into  liquidation  in  November,  1895. 

The  Bank  of  San  Francisco  was  incorporated  in  the  fall 
of  1874,  and  paid  its  first  dividend  in  1875.  It  retired  about 
three  years  later  under  a  general  depression  in  business. 

The  Swiss- American  Bank  was  doing  business  here  in 
the  seventies,  but  ceased  about  1878. 

The  Nevada  Bank  opened  for  business  about  the  1st  of 
October,  1875,  with  a  capital  of  $5,000,000,  most  of  which  was 
contributed  by  the  bonanza  firm  of  Messrs.  Flood,  O'Brien, 
Fair  and  Mackay,  under  the  presidency  of  Louis  McLane. 
The  opening  of  this  bank  was  quite  spectacular,  owing  to  the 
large  amount  of  gold  coin  it  was  able  to  display  at  the  time 
when  money  was  unusually  stringent  throughout  the  State. 

Within  a  year  or  so  afterwards  the  capital  was  increased 
to  $10,000,000  by  the  joint  check  of  Flood  and  O'Brien.  Up 
to  that  time  this  individual  check  was  reported  to  be  the 
largest  ever  drawn  at  any  point  west  of  Chicago.  This  is  the 
largest  paid-up  capital  ever  named  for  a  bank  in  California. 

Large  Bank  Capital — Big  Merger. 

At  that  time  the  Nevada  Bank  not  only  had  the  largest 
capital  of  any  bank  on  the  coast,  but  probably  the  smallest 
list  of  stockholders,  there  being  only  six,  barely  enough  to 
come  within  the  legal  limits  of  a  bank  directory. 

The  restrictions  of  the  new  constitution  adopted  in  1879 
were  not  favorable  to  large  bank  capital,  and  so  the  $10,000,000 
was  cut  down  to  $3,000,000. 

The  four  men  who  started  the  Nevada  Bank  had  made 
considerable  money  from  mines  in  Nevada  and  hence  its  name. 

Subsequently  the  bank  passed  to  new  parties,  who  have 
placed  it  in  a  high  position. 


Banking  in  California  53 

In  1898,  it  was  re-organized  as  the  Nevada  National,  and 
in  1905  it  absorbed  the  Wells  Fargo  Bank  with  its  large 
resources,  and  was  then  christened  as  the  Wells  Fargo  Nevada 
National. 

Since  this  consolidation  was  effected,  it  has  ranked  as  one 
of  the  largest  two  commercial  banks  west  of  Chicago,  and  has 
handled  successfully  several  large  bond  propositions. 

The  Anglo-Califomian  Bank,  Limited,  opened  in  April, 
1873,  has  had  a  successful  career,  first,  under  the  joint  man- 
agement of  F.  F.  Low  and  Ignatz  Steinhart,  and  subsequently- 
after  Mr.  Low's  death  under  the  management  of  Mr.  Steinhart 
and  P.  N.  Lilenthal,  until  the  latter 's  tragic  death  by  a  vicious 
horse  who  jumped  into  the  automobile  in  which  Mr.  Lilienthal 
was  riding. 

A  few  years  ago  California  parties  bought  out  the  interest 
owned  in  London,  and  thus  made  the  bank  a  purely  local 
institution.  Later  still,  it  was  united  with  the  London-Paris 
National  under  the  name  of  the  Anglo  and  London-Paris 
National,  thus  becoming  a  strong  institution  with  large 
resources. 

As  a  result  of  this  combination,  an  elegant  steel  and  stone 
structure  has  been  erected  at  the  northwest  comer  of  Sutter 
and  Sansome,  in  which  the  business  of  the  bank  has  been 
housed  since  April  25,  1910. 

The  consolidated  bank  is  well  officered  by  those  most 
prominently  identified  with  the  two  banks  forming  the  merger, 
and  a  prosperous  career  is  confidently  predicted. 

Rapid  Growth — Sudden  Collapse. 

The  California  Safe  Deposit  and  Trust  Company  was 
established  in  1882  with  an  authorized  capital  of  $2,000,000. 
It  immediately  took  possession  of  a  fine  office  building  of  six 
stories  on  the  southeast  corner  of  California  and  Montgomery 
streets,  the  bank  proper  occupying  the  main  floor.  In  the 
basement  of  this  building  the  first  extensive  and  modernly 
equipped  safe  deposit  vaults  ever  put  in  operation  in  the 
State  were  opened  in  1875. 


5*  Banking  in  California 

The  paid-up  capital  of  the  bank  in  1889  was  $900,000, 
and  most,  if  not  all,  was  supposed  to  be  represented  in  the 
building  and  in  the  fine  vaults.  The  safe  deposit  department 
was  well  patronized  from  the  start,  and  held  most  of  its 
patrons  even  after  many  rivals  had  entered  the  field. 

The  paid-up  capital  was  increased  from  time  to  time 
subsequently  to  1889  until  it  was  fully  paid  up,  and  a  further 
enlargement  ordered.  The  statement  for  June  30,  1907, 
showed  a  paid-up  capital  of  $2,500,000;  surplus  and  profits, 
$632,376;  dividends  unpaid,  $2,031;  due  depositors,  $9,303,- 
532,  over  $5,000,000  of  which  was  on  time  certificates.  The 
total  resources  on  the  same  date  were  $12,437,939,  and  which 
were  described  as  follows:  Real  estate,  $800,000;  vaults  and 
safe  deposit  boxes,  $175,000;  improvements,  furniture  and 
fixtures,  $64,787;  other  real  estate,  $209,373;  time  loans, 
$2,181,514 ;  call  loans,  $2,966,798 ;  bonds  and  stocks,  $4,472,- 
393 ;  cash,  $1,471,078 ;  other  assets,  $96,990. 

The  bank  lost  its  building  in  the  fire  of  April,  1906, 
except  the  walls  of  the  first  story,  which  were  roofed.  The 
safe  deposit  vaults  in  the  basement  were  uninjured,  though 
covered  with  tons  of  debris. 

The  bank  secured  temporary  quarters  in  the  unharmed 
residence  district  immediately  after  the  fire,  and  went  on  with 
its  business.  There  temporary  quarters,  with  three  other 
similar  establishments  were  maintained  even  after  the  main 
office  had  been  re-opened. 

The  bank  was  a  hustler  for  deposit  accounts,  and  took 
much  pride  in  indicating  this  growth  in  frequent  statements. 
In  four  years  ending  June  30,  1907,  the  deposit  credits  had 
increased  from  $2,142,000  to  $9,303,532.  Such  marvelous 
expansion  astonished  the  more  conservative  bankers. 

The  drawing  force  in  securing  these  deposits,  in  addition 
to  personal  and  persistent  effort,  was  the  remuneration  offered 
for  the  same.  In  the  official  statement  for  July  1,  1907,  the 
bank  offered  to  pay  4  per  cent  per  annum  on  savings  deposits, 
2  per  cent  on  open  accounts  subject  to  check,  interest  credited 


Banking  in  California  55 

monthly;  2i/2  per  cent  on  certificates  of  deposit,  repayable  in 
30  days ;  3  per  cent,  3%  per  cent,  3%  per  cent  and  4  per  cent 
on  the  same,  repayable  in  60  days,  90  days,  6  months  and  one 
year  respectively. 

After  calling  attention  to  an  increase  of  $1,443,580  in 
deposits  for  the  year  ending  July  1,  1906,  depositors  were 
assured  that  the  liberal  rates  paid  for  the  use  of  money  would 
be  continued. 

Before  the  management  had  the  privilege  of  issuing 
another  semi-annual  statement,  the  doors  of  the  bank  were 
closed.  This  event  happened  a  little  after  2  o  'clock  on  October 
30,  1907. 

Two  Big  Banks  Unite. 

The  London,  Paris  and  American  Bank,  Limited,  was 
incorporated  in  England  in  January,  1884,  and  opened  for 
business  in  this  city  on  the  5th  of  the  following  March.  It 
was  largely  the  outcome  of  the  incorporation  of  the  private 
bank  of  Lazard  Freres,  previously  for  some  years  in  existence 
in  this  city.  It  had  a  good  clientele  to  start  with,  which  it 
has  enlarged  from  year  to  year  through  efficient  management, 
which  has  embraced  Messrs.  Meyer,  Cahn,  Altschul,  Greene- 
baum  and  Fleishhacker. 

The  paid-up  capital  of  the  bank  on  July  1,  1884,  was 
$1,500,000  and  $500,000  was  called  in  the  last  half  of  the  same 
year.  The  report  for  July  31,  1907,  showed  a  paid-up  capital 
of  over  $3,000,000  and  resources  of  $8,460,200. 

Soon  afterwards  the  bank  was  re-organized  under  the 
Federal  system,  and  in  1909  it  took  over  the  business  of  the 
Anglo- Calif ornian  Bank,  Limited,  when  the  corporate  title 
was  again  changed  to  the  Anglo  and  London-Paris  National. 

The  report  made  by  the  bank  under  its  new  title  for 
March  29,  1910,  showed  a  paid-up  capital  of  $4,000,000,  sur- 
plus and  undivided  profits  of  $1,602,000 ;  individual  and  other 
deposits  of  over  $23,000,000  and  total  resources  of  over 
$32,000,000,  making  it  the  third  largest  bank  under  that 
system  in  the  city. 


56  Banking  in  California 

More  National  Banks. 

There  were  no  additions  or  changes  among  the  commercial 
banks  of  San  Francisco  in  1885. 

In  October,  1886,  the  private  bank  of  Crocker- Woolworth 
&  Co.  went  under  the  national  system  as  the  Crocker-Wool- 
worth  National  Bank,  with  a  capital  of  $1,000,000.  R.  C. 
Woolworth,  before  coming  to  this  city,  had  been  engaged  in 
banking  in  Sacramento,  and  Charles  Crocker  of  the  big  rail- 
way four  had  become  much  attached  to  him. 

The  Crocker  Bank  has  had  a  prosperous  career  from  the 
start,  and  for  many  years,  even  since  the  completion  of  the 
building  at  the  gore  of  Market  and  Post,  has  been  an  occupant 
of  the  same. 

Upon  the  expiration  of  its  twenty-year  charter  in  1906, 
the  same  was  renewed  and  the  name  changed  to  the  Crocker 
National.  William  H.  Crocker  has  been  the  president  for 
many  years.  The  report  for  September  1,  1909,  showed  a 
paid-up  capital  of  $1,000,000  and  a  surplus  of  $2,200,000, 
with  nearly  $11,000,000  in  deposits  and  $22,712,600  in  re- 
sources. The  Crocker  Safe  Deposit  Vaults  are  in  the  same 
building. 

The  California  National  Bank  was  organized  in  November, 
1^86,  with  an  authorized  capital  of  $300,000,  but  did  not  open 
for  business  until  January  3,  1887. 

It  made  its  first  statement  to  the  Comptroller  under  his 
call  of  December  28,  1886,  when  it  reported  a  paid-up  capital 
of  $160,000.  This  was  the  fourth  bank  to  open  in  San  Fran- 
cisco under  national  charter. 

Though  the  bank  succeeded  in  attracting  considerable 
business  at  the  start,  it  soon  met  with  reverses,  and  after  a 
run  of  about  two  years,  it  was  obliged  to  suspend,  making  the 
second  of  that  character  in  the  city  to  fall  out.  It  failed  in 
December,  1888. 

The  only  new  local  State  bank  to  come  into  existence  in 
1887  was  the  American  Bank  and  Trust  Company,  which 
opened  on  the  northeast  comer  of  Montgomery  and  Commer- 


Banking  in  California  57 

cial,  a  site  that  had  been  devoted  to  the  banking  business  from 
the  days  of  the  pioneers.  Subsequently  it  took  the  prominent 
comer  of  the  Mills  Building. 

While  in  that  location  it  was  converted  into  the  American 
National  Bank  under  the  leadership  of  P.  E.  Bowles,  a  prom- 
inent Oakland  banker.  Since  this  change,  the  bank  has 
developed  a  large  and  prosperous  business,  and  its  outlook 
for  the  future  is  quite  promising.  It  is  now  in  the  Merchants 
Exchange  Building. 

Private  Banks  Incorporate. 

The  private  bank  of  Sather  &  Co.  was  incorporated  in 
1887  under  the  name  of  the  Sather  Banking  Company.  Pedar 
Sather,  the  senior  member  of  the  private  banking  firm  of 
Drexel,  Sather  &  Church,  was  one  of  the  few  private  pioneer 
bankers  of  San  Francisco  who  managed  to  preserve  the  sol- 
vency of  his  business  through  all  trials  of  the  early  years. 

Ten  years  later  the  above  bank  became  the  San  Francisco 
National  Bank,  which  was  organized  on  December  1,  1897, 
thus  continuing  a  banking  existence  begun  in  1849.  The  San 
Francisco  National  Bank  is  the  occupant  of  its  own  building, 
one  that  was  erected  in  the  sixties  expressly  for  and  exceed- 
ingly well  adapted  to  the  banking  business,  to  which  it  has 
been  exclusively  devoted  since  its  erection. 

In  1888,  the  Market  Street  Bank  was  licensed  to  com- 
mence business  with  an  authorized  capital  of  $100,000,  of 
which  $25,000  had  been  paid  up,  and  with  W.  J.  Somers  as 
president  and  H.  C.  Somers  as  cashier.  This  was  the  second 
bank  of  that  name  to  enter  the  field,  the  first  having  been 
organized  as  a  savings  bank,  and  retiring  after  an  uneventful 
career  of  about  two  years.  The  commercial  bank  of  the  same 
name  started  in  1888,  also  had  a  short  life,  voluntarily  retiring 
in  1889. 

The  Mercantile  Bank  of  San  Francisco  was  incorporated 
in  1890,  opening  for  business  in  June  of  that  year  when  it 
reported  a  paid-up  capital  of  $131,000.     The  promoters  of 


^8  Banking  in  California 

this  bank  did  not  meet  with  the  encouragement  expected,  and 
voluntarily  retired  in  the  following  year. 

The  private  bank  of  Donohoe,  Kelly  &  Co.  started  in 
1864,  was  incorporated  as  the  Donohoe-Kelly  Banking  Com- 
pany in  March,  1891,  and  continues  in  successful  operation 
under  the  supervision  of  the  son  of  its  founder. 

The  private  bank  of  Sisson,  Crocker  &  Co.,  which  started 
in  1890,  was  incorporated  in  July,  1892,  and  made  its  first 
report  to  the  Bank  Commissioners  January  1,  1893,  when  the 
resources  were  given  at  $317,000.  Subsequently  this  bank 
was  absorbed  by  the  Crocker-Woolworth  National  Bank. 

Big  Trust  Company. 

The  Union  Trust  Company  was  incorporated  in  1893,  and 
for  the  first  few  years  was  classed  as  a  savings  bank.  Since 
then  it  has  been  classed  as  a  commercial  bank  and  trust  com- 
pany. 

This  bank  was  the  suggestion  of  Isaias  W.  Hellman, 
president  of  the  Nevada  Bank  of  San  Francisco,  and  previ- 
ously and  also  since  quite  prominent  as  a  banker  in  the 
southern  part  of  the  State. 

Mr.  Hellman  was  enthusiastically  supported  in  the  new 
enterprises  by  men  of  large  means.  The  par  value  of  the 
shares  was  placed  at  $1,000  so  as  to  keep  them  well  under 
the  control  of  the  original  purchasers.  In  fact  it  was  under- 
stood that  there  should  be  no  indiscriminate  offering  of  the 
shares  at  public  sale. 

The  bank  has  attained  a  prominent  place  among  the 
financial  institutions  of  the  city  with  Mr.  Hellman 's  son  as 
vice-president  and  manager.  It  has  just  completed  an  ele- 
gant structure  of  steel  and  stone  on  Market  street  and  Grant 
avenue  with  up-to-date  safe  deposit  vaults  and  boxes. 

The  Columbian  Banking  Company  was  incorporated  in 
1893.  The  financial  conditions  of  the  country  were  not  favor- 
able at  that  time  for  the  launching  of  new  banks  or  for  the 
maintaining   existing  ones  on   an   even  keel,    owing   to   the 


Banking  in  California  59 

general  panic  which  swept  the  country  from  the  Atlantic  to 
the  Pacific,  though  much  less  forceful  here  than  elsewhere. 

The  Bank  of  Commerce  was  incorporated  on  May  24, 
1895,  and  continued  in  operation  for  several  years,  but  was 
finally  absorbed  in  the  organization  of  the  Western  National, 
which  was  organized  to  take  it  over. 

The  Swiss- American  Bank  was  incorporated  in  Septem- 
ber, 1896,  and  is  still  in  operation.  Following  the  fire  of 
April,  1906,  it  maintained  a  branch  on  Fillmore  street  for 
about  three  years.  It  has  been  growing  steadily  from  the 
start  and  its  statement  for  July  15,  1908,  reported  resources 
of  nearly  $2,600,000.  It  is  an  agency  of  the  Banca  Swizzera- 
Americana  of  Locarno. 

Evolutions  in  Bank  Names. 

In  the  fiscal  year  of  1896-7,  there  was  transferred  to  San 
Francisco  from  San  Luis  Obispo,  the  California  Land  Mort- 
gage Union  and  Savings  Bank,  which  was  incorporated  in 
October,  1890.  This  bank  had  been  doing  a  fairly  good  busi- 
ness in  that  southern  town,  but  the  managers  were  ambitious, 
and  hence  the  transfer. 

There  was  no  change  in  the  name  or  organization  at  first, 
and  the  new  addition  to  the  financial  forces  of  the  city  was 
put  in  the  savings  bank  class. 

In  July,  1896,  the  bank  reported  its  deposits  at  San  Luis 
Obispo  where  it  was  doing  business  at  the  time  at  $656,100. 
A  year  later,  when  it  was  doing  business  in  San  Francisco,  this 
item  in  the  statement  was  put  down  at  $527,500. 

About  two  years  later,  the  bank  was  reorganized  and  the 
name  changed  to  the  German  Trust  Company,  the  previous 
long  name  not  being  suitable  to  the  stirring  metropolitan  city. 

After  the  first  statement  had  been  published  under  its 
new  and  charter  name,  the  German  Savings  and  Loan  Society 
objected  to  the  use  of  the  word  German  in  the  title  as  likely 
to  lead  to  confusion. 

Apparently  the  objection  was  not  very  well  received, 
though  it  was  given  consideration,  and  when  the  next  state- 


60  Banking  in  California 

ment  was  published,  the  title  was  the  Germania  Trust  Com- 
pany. At  the  close  of  1899,  the  resources  of  the  bank  were 
over  $1,000,000. 

A  little  later,  the  managers  made  another  change  by  a 
separation  of  accounts,  under  two  new  organizations.  The 
trust  business  was  put  under  the  corporate  name  of  Central 
Trust  Company  and  the  commercial  feature  under  the  cor- 
porate title  of  Germania  National  Bank. 

The  report  of  the  Germania  National  for  September  9, 
1903,  gives  the  paid-up  capital  $300,000;  individual  deposits, 
$230,500  and  resources  at  $703,500. 

Some  months  after  the  fire  of  April,  1906,  it  was  voted 
to  place  the  Germania  National  into  liquidation,  and  that 
course  was  followed  as  rapidly  as  possible. 

The  Central  Trust  Company  has  developed  much  business 
locally,  and  also  with  financial  institutions  outside  of  the  city. 
It  has  an  admirable  location  on  Market  at  the  intersection  of 
Sutter. 

Another  Big  Trust  Company. 

On  January  1,  1898,  the  Nevada  National  succeeded  the 
Bank  of  Nevada,  the  latter  having  been  started  as  a  State 
bank  in  October,  1875.  In  1905,  the  Nevada  National  absorbed 
the  Wells  Fargo  &  Co.  Bank,  a  State  incorporation,  and  the 
name  was  again  changed  to  the  Wells  Fargo  Nevada  National. 
The  primary  organization  has  had  a  continued  existence  for 
thirty-five  years. 

In  the  month  of  March,  1899,  A.  Sbarboro  and  his  friends 
incorporated  the  Italian- American  Bank,  which  is  still  flour- 
ishing, showing  steady  gains  from  the  start. 

In  the  following  April,  the  Mercantile  Trust  Company 
was  incorporated  with  a  capital  of  $1,000,000  and  a  very 
strong  directory.  The  safe  deposit  vaults  installed  by  the 
company  are  of  a  superior  character.  Its  fine  new  building 
was  not  very  seriously  damaged  by  the  fire  of  April,  1906,  and 
it  was  the  first  bank  to  reopen  after  that  great  disaster,  and 
also  furnished  quarters  for  the  Clearing  House.     In  1908,  it 


Banking  in  California  61 

took  over  the  safe  deposit  business  of  the  suspended  California 
Safe  Deposit  and  Trust  Company. 

Its  first  president  was  F.  W.  Zielie,  who  subsequently 
retired  on  account  of  his  health.  He  was  succeeded  by  N.  D. 
Eideout,  a  pioneer  and  successful  banker,  who  held  the  position 
until  removed  by  death.  For  the  past  two  years  William  G. 
Irwin,  a  wealthy  Hawaiian  sugar  planter,  has  been  the  presi- 
dent. 

The  capital  was  soon  doubled  and  a  large  reserve  was 
accumulated.  In  July,  1908,  the  resources  were  given 
at  $12,334,000.  The  capital  at  that  time  was  $2,000,000 ;  re- 
serve, $1,500,000;  surplus,  $575,000;  and  individual  deposits, 
$5,677,300. 

The  rapid  development  of  the  company's  business  made 
an  enlargement  of  the  premises  necessary,  and  a  considerable 
addition  to  the  original  quarters  was  the  result. 

In  1909,  steps  were  taken  to  divide  the  business  by 
placing  the  commercial  feature  under  a  new  name  but  without 
changing  the  general  management.  This  was  effected  in 
March,  1910,  under  the  name  of  the  Mercantile  National,  with 
a  capital  of  $2,000,000  and  a  strong  reserve.  The  business  of 
both  banks  is  under  the  same  roof  and  officers. 

Some  Foreign  Banks. 

The  Yokohama  Specie  Bank  of  Japan  opened  a  branch  in 
San  Francisco  in  September,  1899,  which  has  been  managed 
satisfactorily  and  profitably.  Soon  after  the  fire  of  1896,  the 
bank  erected  a  fine  building  of  its  own,  which  it  has  since 
occupied. 

The  Western  National  of  San  Francisco  was  incorporated 
in  1901,  absorbing  the  Bank  of  Commerce,  a  State  bank,  in  the 
operation.  Upon  winding  up,  the  latter  paid  its  depositors 
in  full. 

The  Canadian  Bank  of  Commerce,  with  headquarters  in 
Toronto,  Canada,  established  a  branch  in  San  Francisco  in 
1901   by  taking  over  the  business  of  the  Bank  of  British 


^2  Banking  in  California 

Columbia,  which  had  been  in  operation  here  since  1862. 
Depositors  were  paid  in  full. 

The  City  and  County  Bank  of  San  Francisco  was  incor- 
porated in  April,  1902.  It  sustained  a  branch  for  three  years 
after  the  fire,  which  was  discontinued  when  the  main  bank 
went  into  new  quarters  on  Market  street. 

The  Comtoir  National  d'Escompte  de  Paris  entered  the 
San  Francisco  field  in  1902,  and  retired  honorably  in  1904. 

In  addition  to  the  Central  Trust  and  Germania  National 
Corporations  in  1903,  previously  mentioned,  there  were  several 
others. 

One  of  these  was  the  Commercial  Bank  and  Trust  Com- 
pany. This  bank  was  organized  under  the  charter  previously 
held  by  the  Bank  of  Templeton,  at  Templeton,  but  which  had 
discontinued  business  at  that  point.  The  Commercial  retired 
in  1905. 

The  Market  Street  Bank  originally  organized  in  1901, 
was  permitted  to  resume  in  1903,  and  suspended  in  1905. 

The  Mission  Bank  was  organized  in  February,  1903.  It 
has  met  with  much  success  at  the  Mission,  where  a  bank  of  that 
character  had  been  long  needed. 

The  French- American  Bank  was  incorporated  in  January, 
1903,  by  the  owners  of  the  French  Savings,  but  the  two  banks 
were  put  under  the  name  of  the  French  American  Savings  in 
the  fall  of  1909.  • 

The  American  National  succeeded  to  the  business  of  the 
American  Bank  and  Trust  Company,  as  previously  mentioned. 

The  International  Banking  Corporation  of  Connecticut 
established  a  branch  in  San  Francisco  in  1903. 

The  International  Bank  and  Trust  Company  of  America 
was  incorporated  in  1903,  but  never  became  active. 

Banks  of  Brief  Existence. 

The  Bay  Counties  Bank  of  San  Francisco  was  incorpor- 
ated in  March,  1903,  but  retired  without  being  much  desired 
in  1906. 


Banking  in  California  63 

The  Central  Exchange  Bank  of  San  Francisco  was  incor- 
porated in  March,  1903,  and  in  August,  1903,  reported  re- 
sources of  $250,  all  in  coin,  which  represented  the  paid-up 
capital. 

The  Federal  Savings  Bank  of  San  Francisco  was  organ- 
ized in  March,  1903,  and  reported  two  years  later  its  resources 
at  $5,016.  Just  three  deposits  were  received  in  1904.  No 
further  report. 

The  Seal  Rocks  Bank  and  the  Standard  Bank  were  formed 
in  the  same  month  and  year  to  do  business  in  this  city.  In 
August,  1905,  the  former  reported  its  resources  at  $544,  and 
then  subsided.  On  the  same  date  the  Standard  had  resources 
of  $17,675,  but  retired  1906. 

In  the  same  month  and  year  there  were  incorporated  the 
United  Bank  and  Trust  Company  and  the  West  Coast  Banking 
and  Trust  Company.  The  former  reported  a  good  line  of 
business  in  August,  1905,  and  established  a  branch  that  year 
in  Alameda.    Neither  reported  in  1906,  nor  since. 

Five  banks  for  doing  business  in  San  Francisco  were 
incorporated  in  1904.  These  were  the  Alcalde,  Alta  California, 
Guaranty  Trust,  Oriental  and  Probate,  but  neither  material- 
ized. The  Russo-Chinese  Bank  opened  a  branch  in  1904,  which 
is  still  in  existence. 

The  Bank  of  Italy,  incorporated  in  August  of  the  same 
year  (1904)  has  made  good  progress  from  the  start,  and  is  now 
housed  in  a  seven-story  steel  frame  structure  of  its  own. 

The  State  Savings  and  Commercial  Bank  was  started  in 
March,  1903,  and  suspended  in  1909. 

The  Scandinavian  Savings  Bank  of  San  Francisco  was 
organized  in  December,  1904,  and  built  up  a  good  business 
quite  rapidly.  The  organizers  of  the  bank  were  so  well  pleased 
with  their  success  that  they  divided  the  business  later  on  by 
putting  part  of  the  same  in  a  national  organization  of  their 
own.  Still  later,  the  Scandinavian  Savings  was  absorbed  by 
the  national  organization,  which  is  known  as  the  Merchants 
National,  and  which  in  1908  took  over  the  business  of  the 
United  States  National  of  San  Francisco. 


64  Banking  in  California 

Rush  for  Bank  Privileges. 

The  year  1905  was  especially  fruitful  in  the  organization 
of  banks  in  California,  owing  to  a  temporary  suspension  of 
the  Act  creating  the  Board  of  Bank  Commissioners.  Scores 
of  franchises  were  obtained,  most  of  them  for  purely  specula- 
tive purposes. 

Those  incorporated  in  that  year  on  San  Francisco  account 
embraced  the  Bank  of  America,  Citizens  State  Bank,  Provident 
Bank,  Seaboard  Bank,  Bank  of  South  San  Francisco,  Man- 
hattan Bank  and  Portuguese- American  Bank. 

In  August,  1905,  the  Bank  of  America  reported  its 
resources  at  $290,768,  including  $232,500  paid-up  capital.  It 
retired  in  the  following  year. 

The  Citizens  State  Bank  was  always  a  small  concern,  and 
suspended  in  1909. 

The  Seaboard  subsequently  went  under  the  national 
system,  and  has  done  well  from  the  start. 

The  Bank  of  South  San  Francisco  made  its  first  report 
in  August,  1905,  giving  its  paid-up  capital  at  $50,000  and  its 
resources  at  $67,279.    Good  progress  since. 

The  Portuguese- American  Bank  is  the  first  organized  in 
San  Francisco  to  appeal  directly  to  the  patronage  of  these 
people,  and  is  meeting  with  much  encouragement. 

The  Manhattan  and  Provident  banks  never  became  active, 
and  departed  without  being  mourned. 

Three  nationals  were  added  to  the  list  in  operation  in 
San  Francisco  in  1905. 

One  of  these  was  the  Citizens  National,  which  was  organ- 
ized by  parties  afiiliated  with  the  Crocker  National.  After  a 
fair  trial  the  organizers  came  to  the  conclusion  that  they  could 
put  their  capital  to  better  use  in  a  State  bank,  and  the  result 
was  the  Bank  of  San  Francisco,  which  took  over  the  business 
of  the  Citizens  National. 

The  second  was  the  National  Bank  of  the  Pacific,  which 
was  supposed  to  have  some  backing  from  the  Western  Pacific 
Eailroad  Company.    The  development  was  slow  and  not  very 


Banking  in  California  65 

encouraging,  and  in  October,  1909,  it  was  absorbed  by  the 
Western  National. 

The  third  was  the  United  States  National  which  became 
absorbed  by  the  Merchants  National  in  1909. 

The  Metropolis  Trust  and  Savings  Bank  was  incorporated 
in  1906,  succeeding  to  the  business  of  the  Phoenix  Building, 
Loan  and  Savings  Association,  organized  in  October,  1889. 
The  bank  now  occupies  one  of  the  modern  structures  built  on 
Market  Street  since  the  fire  and  has  in  the  basement  safe 
deposit  vaults  of  an  up-to-date  character. 

The  Merchants  National  was  organized  in  November,  1906, 
by  the  management  of  the  Scandinavian  Savings  Bank,  to 
take  over  the  commercial  features  of  that  bank.  It  did  not 
open  for  regular  work  until  January,  1907.  It  has  made  ex- 
cellent progress  from  the  start.  In  1908,  it  took  over  the 
business  of  the  United  States  National. 

Japanese  Banks. 

Licenses  were  given  in  1906  to  three  Japanese  banks,  two 
incorporate  and  one  private.  These  were  the  Japanese  Bank, 
the  Japanese- American  Bank  and  the  Kimmon  Ginko.  The 
last  named  was  a  private  bank,  which  became  incorporated  in 
March,  1908.    All  of  these  were  subsequently  closed  out. 

The  year  1907  added  materially  to  the  list  of  banks  in 
San  Francisco. 

The  Imperial  Bank  was  the  first,  having  been  incorporated 
in  January,  1907,  but  it  became  embarrassed  in  less  than  two 
years  and  had  to  close. 

The  Union  State  Bank  was  organized  in  March,  1907,  but 
got  into  trouble  in  the  latter  part  of  1909,  and  was  closed  by 
the  Superintendent  of  Banks. 

The  Bank  of  San  Francisco  was  organized  in  May,  1907, 
to  take  over  the  business  of  the  Citizens  National,  because  the 
stockholders  thought  they  could  cover  a  larger  field  under 
State  than  under  national  authority.  This  bank  subsequently 
established  a  branch  to  look  after  the  savings  department  more 
exclusively. 


66  BanUiiig  in  California 

A  very  small  bank  with  a  very  large  name  came  into 
operation  soon  after  the  fire,  and  in  April,  1907,  it  was  incor- 
porated as  the  Bank  of  Greater  San  Francisco,  the  name  it 
bore  when  it  first  opened  as  a  private  bank.  The  commission- 
ers closed  it  in  February,  1908,  and  the  managers  never  real- 
ized the  fruit  of  their  ambition. 

More  New  Banks  and  Changes. 

The  First  Federal  Trust  Company  was  incorporated  in 
August,  1907,  by  the  management  of  the  First  National  Bank. 
It  has  a  capital  of  $1,500,000,  which  is  invested  in  the  lot  and 
tall  steel  and  stone  structure  on  the  northwest  corner  of  Mont- 
gomery and  Post.  This  is  considered  one  of  the  most  attractive 
buildings  in  the  city.  The  two  banks  occupy  the  main  floor 
and  basement,  which  are  fitted  up  in  elegant  style,  with  ample 
vaults  of  the  most  approved  design. 

The  Canton  Bank  was  organized  in  October,  1907.  This 
is  a  purely  Chinese  bank,  the  first  and  only  one  in  the  State. 

The  Banca  Popolare  Operaia  Italiana  was  organized  in 
November,  1907,  with  a  capital  of  $250,000.  The  bank  has 
erected  a  suitable  building  for  its  exclusive  use,  and  is  meeting 
with  commendable  success.  This  makes  four  banks  in  the 
interest  of  the  Italian  community.  All  four  have  savings  and 
commercial  departments. 

The  Swedish- American  Bank  was  incorporated  in  1908, 
and  is  the  first  bank  to  make  a  direct  appeal  for  the  patronage 
of  the  large  and  industrious  Swedish  population. 

The  Seaboard  Bank  went  under  the  national  system  in 
1908. 

The  London,  Paris  and  American  Bank  became  a  national 
bank  in  the  early  part  of  1909,  and  was  joined  a  few  months 
later  by  the  Anglo- Calif  ornian.  Limited,  under  the  name  of  the 
Anglo  and  London-Paris  National.  This  merger  placed  under 
the  national  system  two  important  foreign  banks,  which  for  all 
practical  purposes  were  regarded  as  State  institutions.  The 
business  of  these  two  big  banks,  now  under  one  management. 


Banking  in  California  67 

was  installed  in  the  fine  building  erected  for  that  purpose  on 
April  25,  1910. 

As  an  incident  to  this  merger,  a  new  bank  was  formed 
under  the  title  of  the  Anglo  Trust  Company,  which  also  went 
into  operation  under  favorable  auspices  in  1909. 

The  Marine  Trust  Company  was  substituted  in  1909  for 
the  Renters  Loan  and  Trust  Company,  organized  in  1890,  but 
which  only  a  few  years  ago  made  reports  to  the  commissioners. 

National  Banks  Capture  San  Francisco. 

In  February,  1910,  The  Bank  of  California  was  authorized 
by  Comptroller  of  the  Currency  to  transact  business  under  the 
name  of  The  Bank  of  California  National  Association.  This 
movement  had  been  under  contemplation  for  some  months. 
It  did  not  meet  with  unanimous  favor  at  first,  partly  from 
sentiment,  no  doubt.  This  was  overcome  to  some  extent,  if  not 
entirely  by  the  consent  of  the  Treasury  Department  to  allow 
the  bank  to  retain  its  State  organization  name  with  the  simple 
addition  of  National  Association.  By  a  special  act  of  Congress 
this  privilege  has  been  accorded  a  few  banks  operating  under 
the  national  system. 

As  the  oldest  incorporated  commercial  bank  in  existence 
in  the  State,  some  of  the  patrons  did  not  wish  to  take  any 
action  that  would  forfeit  that  prestige.  This  does  not  count 
for  much  after  all.  The  bank  will  be  known  as  The  Bank  of 
California  in  the  future  as  it  has  been  in  the  past. 

In  March,  1910,  the  Mercantile  National  Bank,  previously 
organized  by  the  Mercantile  Trust  Company,  was  authorized 
to  commence  business  with  a  capital  of  $2,000,000. 

The  placing  in  operation  of  these  two  large  national  banks 
has  given  that  form  of  banking  the  balance  of  power  in  the 
city. 

The  Bank  of  Commerce  of  San  Francisco  was  licensed  to 
do  business  about  the  first  of  the  year.  This  makes  the  third 
bank  of  that  name  to  start  in  this  city,  the  other  two  having 
dropped  out  of  the  race. 


68  BanMng  in  California 

Daniel  Meyer,  a  pioneer  among  private  bankers,  is  still 
in  the  field,  and  holding  his  own  with  the  other  money  lenders. 
Mr.  Meyer  is  practically  alone  in  the  private  banking  field 
in  San  Francisco,  though  of  course  there  are  many  private 
money  lenders  in  the  city. 

Antoine  Borel  has  for  many  years  been  engaged  along 
that  line,  but  was  never  classed  as  a  private  banker  by  the 
State  officials.  Since  the  fire  Mr.  Borel  has  erected  a  very 
attractive  building  in  which  to  transact  his  business. 

Annexed  will  be  found  some  statistics  showing  the  devel- 
opment of  the  savings  banks  of  San  Francisco  along  general 
lines  in  one  thousand-dollar  amounts : 


Banking  in  California 
San  Francisco  Savings  Banks  Statistics. 


69 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1858 

1 

$      20 

$    17 

$          22 

1859 

1 

16 

17 

96 

141 

176 

1860 

2 

32 

15 

69 

254 

410 

1861 

3 

60 

32 

1,135 

1,000 

1,214 

1862 

4 

100 

221 

2,952 

2,800 

3,357 

1863 

5 

130 

312 

2,944 

3,050 

3,403 

1864 

5 

186 

215 

3,858 

3,800 

4,462 

1865 

5 

280 

509 

5,103 

4,800 

5,899 

1866 

5 

310 

715 

7,393 

6,950 

8,506 

1867 

6 

380 

859 

10,359 

9,300 

11,844 

1868 

7 

591 

1,078 

17, 166 

16, 500 

19,  532 

1869 

8 

1,186 

1,392 

22, 342 

22, 000 

25,  882 

1870 

9 

1,375 

1,582 

26, 634 

25, 676 

30, 287 

1871 

11 

1,558 

1,615 

31,290 

30, 408 

35,  582 

1872 

11 

2,011 

1,815 

37, 033 

36, 343 

42,398 

1873 

12 

2,353 

1,974 

42, 475 

41, 829 

48,  760 

1874 

14 

2,591 

2,014 

46,  971 

46,  557 

53,968 

1875 

13 

3,133 

2,205 

55, 871 

55, 713 

64,  354 

1876 

13 

3,686 

2,502 

56, 298 

56,657 

65,828 

1877 

14 

3,567 

3,243 

59,  604 

57, 552 

65,  783 

1878 

12 

3,775 

3,400 

60, 631 

57, 642 

65, 600 

1879 

8 

3,503 

3,600 

53,  954 

47,  816 

58, 000 

1880 

9 

3,354 

3,811 

42,  342 

33, 096 

45, 842 

1881 

9 

3,350 

7,000 

42,  323 

32,431 

45, 888 

1882 

8 

3,259 

11,232 

44,  914 

28,641 

48, 410 

1883 

8 

3,339 

17, 145 

47,  950 

28,227 

51,498 

1884 

8 

3,425 

16,  507 

51,897 

31, 864 

55,  568 

1885 

8 

3,542 

15,074 

52,  425 

35, 290 

56, 172 

1886 

8 

3,794 

13, 450 

53,  487 

39,  383 

57, 485 

1887 

8 

3,873 

15,  379 

57, 587 

41,717 

61,876 

1888 

8 

4,007 

17,  700 

63, 154 

47, 079 

67, 390 

1889 

9 

5,165 

17,074 

69,  927 

55, 069 

75, 352 

1890 

9 

5,724 

15, 165 

79,086 

65,  681 

85, 149 

1891 

10 

6,901 

15, 455 

88, 539 

75,  479 

96,069 

1892 

10 

7,262 

16,  375 

97, 601 

83, 274 

105, 640 

1893 

10 

8,066 

16, 824 

107, 224 

92, 336 

115,932 

1894 

11 

8,627 

12, 256 

101,463 

88, 597 

111,032 

1895 

10 

8,936 

14,  526 

100,  444 

86, 825 

110,028 

1896 

10 

9,453 

20,  240 

105, 189 

87, 024 

116, 109 

1897 

10 

9,584 

23,763 

100, 851 

84, 029 

112,878 

1898 

10 

9,455 

32,  542 

105, 192 

74, 472 

115,631 

1899 

9 

9,305 

33,  357 

110,002 

70, 595 

119,548 

1900 

9 

9,517 

46,  987 

115,688 

66,317 

127,317 

1901 

9 

9,699 

61, 437 

124,  580 

64, 273 

134,  499 

1902 

9 

9,885 

63, 551 

133, 430 

68,  662 

143,  525 

1903 

9 

10,233 

67,  769 

144, 206 

74, 590 

154,  763 

1904 

9 

10,612 

69,237 

154, 907 

75, 729 

166,  467 

1905 

12 

11,715 

64,  835 

160,027 

94, 939 

172, 181 

1906 

12 

12,  365 

65, 858 

169, 538 

104, 091 

182, 355 

1907 

12 

12, 824 

59,  927 

160, 965 

97,388 

175, 309 

1908 

12 

12,  718 

48, 190 

147, 095 

100,  643 

163, 665 

1909 

13 

13, 254 

49, 425 

136, 553 

89, 625 

152,237 

70 


Banking  in  California 


San  Francisco  Commercial  Bank  Statistics. 

The  State  incorporated  commercial  banks  of  San  Francisco  present  the  following 
exhibit  along  the  same  lines  of  information. 

(OOO's  omitted) 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1877 

12 

$30,329 

$   5,803 

$  38,686 

$  46,019 

$  83, 895 

1878 

11 

37,  545 

3,022 

39,  806 

54,  455 

77,400 

1879 

8 

26,  815 

3,500 

26, 050 

35,215 

55, 592 

1880 

9 

21,  208 

4,000 

22, 949 

20, 916 

47, 907 

1881 

9 

21,208 

4,500 

29,  949 

20,116 

47, 909 

1882 

9 

21,850 

5,538 

22, 803 

26,  243 

49, 777 

1883 

10 

24,  416 

2,430 

22, 153 

23, 244 

51,392 

1884 

10 

27, 151 

3,996 

21, 322 

31,518 

53, 157 

1885 

11 

27,  366 

1,737 

23,  387 

36,502 

59, 806 

1886 

11 

28,  748 

923 

24, 465 

36, 577 

56, 887 

1887 

11 

25, 990 

1,607 

26, 944 

36,  679 

58, 906 

1888 

13 

32,  627 

4,323 

25,  526 

38, 179 

64, 650 

1889 

14 

33,859 

2,993 

26, 185 

38,530 

65, 755 

1890 

13 

35, 695 

2,123 

24, 625 

40,  481 

65, 294 

1891 

14 

37,  324 

1,894 

24,  709 

42,  597 

68, 591 

1892 

15 

39, 564 

2,414 

26,  926 

47,  810 

73, 354 

1893 

16 

39, 351 

2,536 

28,223 

47,485 

74,643 

1894 

16 

37,  239 

2,340 

24, 292 

41,379 

67, 275 

1895 

16 

34, 236 

3,298 

30,  391 

40,  345 

71,  201 

1896 

16 

34, 656 

4,987 

26, 907 

35, 885 

68, 705 

1897 

15 

30, 222 

6,493 

29,081 

36, 953 

68, 339 

1898 

15 

18,  878 

4,241 

28, 659 

29, 488 

56, 479 

1899 

16 

23, 159 

5,819 

34, 516 

33,  325 

64, 122 

1900 

18 

20, 179 

6,319 

44,011 

40, 038 

74,  919 

1901 

18 

21,  659 

6,727 

46, 271 

40, 326 

76, 543 

1902 

17 

23,  700 

6,690 

55, 545 

47,  416 

90, 186 

1903 

19 

30, 524 

7,732 

67,853 

60,  720 

109, 295 

1904 

24 

38,436 

11,598 

65, 123 

63, 188 

117,476 

1905 

32 

41,  493 

12, 683 

71,460 

64,  758 

127,  374 

1906 

32 

32,  473 

13, 782 

80,875 

73, 187 

131,409 

1907 

40 

35, 808 

18, 067 

101,902 

84, 635 

157, 157 

1908 

40 

37,028 

15,357 

70, 225 

72, 556 

130, 631 

1909 

34 

32,256 

14,418 

62, 572 

53,  369 

111,035 

The  new  State  system  of  departmental  banking  in  vogue  since  July  1,  1909,  makes 
it  impracticable  to  give  separate  classifications  for  1910.  Combined,  the  totals  of  the 
State  banks  in  San  Francisco  for  March  29,  1910,  show  a  considerable  decrease  because 
of  the  transfer  of  large  accounts  to  the  National  system. 

Similar  statistics  from  the  reports  of  the  National  Banks  of  San  Francisco  are 
herewith  appended. 


Banking  in  California 


71 


San  Francisco  National  Bank  Statistics. 

(OOO's  omitted) 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1872 

1 

$   1,041 

$   500 

$    199 

$    852 

%    1,517 

1873 

2 

2,563 

500 

2,472 

4,325 

6,652 

1874 

2 

2,639 

700 

2,500 

3,540 

7,404 

1875 

2 

2,716 

700 

4,672 

5,392 

9,623 

1876 

2 

3,341 

600 

2,595 

3,844 

7,417 

1877 

2 

3,262 

620 

1,152 

3,355 

5,314 

1878 

2 

2,858 

600 

1,331 

3,028 

5,181 

1879 

2 

2,893 

580 

1,529 

3,065 

5,541 

1880 

2,153 

570 

984 

2,142 

4,022 

1881 

1,662 

560 

1,185 

2,201 

3,996 

1882 

1,680 

550 

1,695 

2,281 

4,578 

1883 

1,694 

570 

1,949 

3,065 

4,813 

1884 

1,711 

575 

1,533 

2,148 

4,101 

1885 

1,725 

590 

1,029 

1,967 

3,496 

1886 

2 

1,734 

720 

1,090 

2,147 

3,729 

1887 

2 

2,748 

780 

1,963 

3,491 

5,073 

1888 

3 

3,345 

1,200 

3,048 

4,786 

8,051 

1889 

2 

3,210 

1,150 

4,182 

5,539 

8,682 

1890 

2 

3,404 

251 

3,640 

5,433 

7,656 

1891 

2 

3,482 

246 

4,520 

6,164 

8,255 

1892 

2 

3,450 

350 

4,079 

6,148 

9,511 

1893 

2 

3,778 

270 

3,982 

6,357 

9,457 

1894 

2 

3,902 

373 

3,436 

5,985 

8,988 

1895 

2 

4,018 

362 

4,514 

6,697 

9,967 

1896 

2 

4,425 

489 

4,747 

^  6,800 

10,  375 

1897 

2 

3,990 

510 

5,946 

7,275 

11,900 

1898 

4 

8,534 

3,420 

14,916 

13,402 

28,645 

1899 

4 

8,600 

3,340 

15, 500 

15, 000 

32,005 

1900 

4 

9,132 

3,268 

16, 834 

17,  327 

35,025 

1901 

4 

9,593 

6,750 

15,392 

18, 573 

34,  891 

1902 

5 

9,650 

8,975 

18,607 

22,000 

29,411 

1903 

7 

11,011 

12, 400 

21,679 

24,478 

53, 668 

1904 

7 

12, 146 

15, 310 

21,314 

26,027 

57, 126 

1905 

7 

12, 810 

17, 924 

22,464 

26,  566 

61,008 

1906 

10 

19,211 

13,215 

36, 954 

51,219 

98, 091 

1907 

11 

21,299 

28, 052 

52, 135 

61,067 

127,417 

1908 

9 

23,  281 

26, 414 

31,  785 

45,  704 

98, 821 

1909 

10 

27,087 

25, 666 

46, 646 

53, 276 

114,436 

1910 

9 

29,716 

24, 580 

49,  368 

69, 319 

137, 175 

*1910 

11 

47, 222 

34, 642 

77, 673 

100, 964 

199, 352 

♦March  29,  1910. 


72  Banking  in  California 

San  Francisco  may  well  be  congratulated  upon  the 
development  of  its  banking  resources  since  the  incorpora- 
tion of  its  first  bank  for  the  conservation  of  the  surplus 
earnings  of  its  inhabitants. 

From  an  aggregation  of  $20,000  in  these  deposits  at 
the  end  of  the  first  semi-annual  term  of  the  pioneer  bank 
in  this  line  of  economy,  the  total  has  been  increased  to  nearly 
$170,000,000  in  1906,  just  previous  to  the  great  disaster 
by  fire  and  earthquake. 

Though  since  then  there  has  been  a  material  reduction 
in  these  credits  as  carried  on  the  books  of  the  banks  strictly 
classed  as  savings  institutions,  some  of  the  apparent  loss 
may  doubtless  be  traced  to  the  savings  departments  now  so 
common  in  the  commercial  banks  of  the  city. 

A  comparison  of  the  other  items  in  these  annual  state- 
ments of  these  savings  banks  is  equally  encouraging. 

From  a  combined  capital  and  surplus  of  $16,000  fifty 
years  ago,  the  total  now  exceeds  $13,000,000. 

The  investments  in  bonds  and  stocks  of  $2,502,000 
in  1876,  the  value  of  such  investments  reached  over  $69,- 
000,000  in  1904.  Savings  banks  have  always  found  it  to 
their  advantage  to  carry  good  lines  of  these  liquid  assets 
to  meet  emergency  calls  for  money. 

From  $17,000  in  loans  in  1858,  there  was  a  total  of 
$104,000,000  carried  in  1906  and  over  $100,000,000  in  1908. 

While  the  aggregate  resources  of  the  single  savings 
bank  in  operation  in  the  city  in  1858  were  only  $22,000, 
these  resources  in  1906  were  over  $182,000,000. 

In  the  early  years  of  incorporated  commercial  banks  in 
San  Francisco,  little  publicity  was  given  to  their  condition, 
and  any  general  summary  of  even  the  leading  items  was 
unknown. 

Not  until  1876  was  there  any  legislation  requiring  public 
reports  of  a  more  or  less  uniform  character  from  these  banks. 
That  was  two  years  before  State  supervision  was  provided. 


Banking  in  California  73 

In  1877,  the  combined  capital  and  surplus  of  the  com- 
mercial banks  of  San  Francisco  was  $30,329,000.  A  few 
years  later,  because  of  bank  troubles,  this  item  was  reduced 
to  a  little  over  $21,000,000.  There  was  another  period  of 
reduction,  but  from  another  cause,  in  1898  to  1901.  The 
cause  at  that  time  was  the  transfer  of  some  large  State  banks 
to  the  national  system.  The  maximum  of  capital  and  surplus 
was  reached  in  1905  when  the  total  was  over  $41,000,000, 
against  a  minimum  total  of  less  than  $19,000,000  in  1898. 

The  same  factors  have  had  their  influence  on  all  the 
other  items  in  these  statements  of  the  city  commercial  banks. 

As  will  be  noticed,  the  value  of  the  stock  and  bond  in- 
vestments has  varied  considerably,  while  the  general  trend 
has  been  upward.  The  smallest  amount  so  invested  was  $923,- 
000  in  1886,  while  the  largest  was  $18,000,000  in  1907.  The 
banks  loaded  up  with  these  quick  assets  in  that  year  for  the 
anticipated  trouble  that  followed  a  little  later. 

There  was  a  heavy  shrinkage  in  the  deposits  following 
the  panics  of  1878,  1893  and  1907.  In  the  first  instance  the 
total  fell  from  $38,000,000  to  less  than  $23,000,000.  In  the 
second  instance  there  was  a  drop  of  $4,000,000  and  in  the  last 
instance  the  reduction  was  over  $31,000,000. 

The  extreme  levels  in  these  deposit  accounts  were  $21,- 
000,000  in  1884  and  $102,000,000  in  1907.  The  total  for  the 
last  named  year  carried  the  unusual  element  of  insurance 
payments  for  losses  of  1906. 

Loans  naturally  contract  under  stringency  in  the  money 
market.  Two  causes  contribute  to  this  shrinkage.  These  are 
more  conservative  loaning  and  the  recall  of  borrowed  money. 

These  outstanding  loans  were  the  smallest  in  1881  and 
the  largest  in  1907,  the  respective  totals  being  $20,000,000 
and  $84,000,000,  a  difference  of  $64,000,000. 

Of  course  the  same  variable  features  have  characterized 
the  aggregate  resources. 

The  first  national  bank  opened  for  business  in  San  Fran- 
cisco in  January,  1871.     For  the  first  quarter  of  a  century 


'^^  Bankmg  in  California 

there  was  but  little  movement  in  the  establishment  of  these 
banks. 

At  no  one  time  was  there  over  three  of  these  banks  in 
operation  here,  and  the  third  bank  did  not  survive  two  years. 
In  seven  of  the  other  years  there  was  only  one  bank  of  this 
kind. 

At  the  end  of  the  first  twenty-five  years  the  number  was 
increased  from  two  to  four  banks,  and  it  has  never  since 
been  less,  while  at  no  time  has  it  exceeded  eleven.  The  aver- 
age for  the  past  five  years  has  been  ten. 

The  several  items  in  the  report  given  above  did  not 
show  much  increase  until  new  banks  were  added  in  1898, 
when  two  State  banks  were  taken  into  the  fold. 

The  three  new  ones  that  appeared  in  1903  had  a  marked 
effect  all  along  the  line. 

Later  on,  when  other  big  State  banks  were  added,  the 
various  items  were  considerably  augmented. 

Bank  Publicity  Legislation. 

Agitation  that  results  in  the  adoption  of  remedial  meas- 
ures for  the  better  protection  of  the  people  is  a  good  thing, 
whatever  may  be  said  of  the  other  kind. 

There  had  been  agitation  over  an  improvement  in  the 
bank  service  of  the  State.  It  had  been  in  progress  for  some 
time.  It  was  earnest  and  quite  general,  and  it  received  a 
new  accession  of  power  and  scope  by  the  bank  failures  in 
the  fall  of  1875. 

The  demand  was  for  greater  publicity  and  clearer  state- 
ments of  the  conditions  of  the  banks. 

Some  of  the  managers  of  at  least  some  of  the  banks 
thought  these  demands  were  impertinent,  and  of  course  were 
opposed  to  granting  them. 

Other  managers  were  as  strongly  in  favor  of  conceding 
the  requests  for  information. 

There  was  still  an  undercurrent  of  feeling  among  many 
that  it  would  not  be  to  their  advantage  to  disclose  too  much 


Banking  in  California  75 

of  the  inner  workings  of  their  banks  lest  rivals  would  take 
advantage  of  the  same  and  so  reduce  profits. 

The  matter  was  carried  to  the  Legislature.  The  mem- 
bers of  this  body  had  been  chosen  while  the  very  atmosphere 
was  charged  with  the  reform  element. 

A  bill  was  introduced  calling  for  the  publication  of  semi- 
annual statements  by  the  banks  on  the  1st  of  January  and 
the  1st  of  July.  Many  of  the  savings  banks  had  been  doing 
this  very  thing  for  years.  The  commercial  banks,  however, 
had  not  followed  their  example  to  any  extent. 

The  proposed  legislation  met  with  the  usual  treatment, 
but,  after  the  members  had  exhausted  themselves  in  trying  to 
shape  it  to  suit  all  classes,  it  was  finally  passed. 

The  first  section  of  the  new  law  reads,  in  part,  as  follows : 

''Every  corporation  and  all  persons  and  every  person 
hereafter  doing  a  banking  business  in  this  State  shall  pub- 
lish," etc. 

The  bill  called  for  semi-annual  statements  of  condition 
on  the  1st  of  January  and  July  of  each  year  to  be  published 
in  a  paper  of  general  circulation  at  the  place  of  business  of 
the  bank  or  in  the  county. 

There  was  no  penalty  fixed  for  non-compliance  with  this 
law,  and  hence  its  weakness. 

First  General  Bank  Statement. 

The  private  bankers  of  the  State  generally  ignored  the 
new  law,  claiming  that  they  were  not  subject  to  its  provisions 
because  they  had  not  asked  the  State  for  a  franchise  to  trans- 
act a  banking  business. 

The  agencies  of  the  foreign  incorporated  banks  doing 
business  in  the  State  treated  the  new  law  with  more  or  less 
indifference. 

The  first  publication  under  the  law  was  made  for  July 
1,  1876.  From  these  reports  the  writer  made  a  compilation 
of  the  paid-up  capital,  deposits  and  cash  of  the  several  banks. 

At  the  second  publication  of  these  statements,  showing 


76  Banking  in  California 

the  condition  of  the  banks  from  December  31,  1876,  the  same 
gentleman  made  another  compilation  on  a  more  extended  scale. 

So  far  as  can  be  recalled,  this  was  the  first  general  state- 
ment of  California  banks  ever  published. 

It  gave  the  name  of  each  bank,  city  and  county  location, 
the  names  of  the  president  and  cashier  of  the  same,  the 
coin  capital,  reserve  fund,  amount  due  depositors,  loans  and 
discounts,  stock,  bond  and  real  estate  investments,  cash  on 
hand,  and  earnings,  expenses  and  dividends  for  the  six  months. 

There  was  no  provision  in  the  law  calling  for  statements 
of  earnings,  expenses  and  dividends,  but  the  savings  banks 
had  been  accustomed  to  furnish  information  along  these  lines, 
and  so  it  was  personally  solicited  from  the  commercial  banks 
as  well  in  the  blanks  sent  out  for  the  purpose. 

The  compilation  for  that  date  included  reports  from 
one  hundred  and  one  banks,  doing  business  in  thirty-five  coun- 
ties of  the  State,  showing  that  the  other  seventeen  counties 
were  without  banks  of  any  kind  except  as  administered  by 
individual  firms. 

All  the  banks  in  the  list  were  incorporated  except  six, 
one  of  which  was  in  Butte  County,  two  in  Marin  County,  one 
in  Siskiyou  County  and  two  in  Yolo  County. 

The  incorporated  banks  embraced  nine  under  the  na- 
tional system,  and  which  at  that  time  were  known  as  gold 
note  banks,  as  distinguished  from  the  currency  banks  under 
the  same  system  in  all  the  other  States. 

Two  of  these  gold  note  banks  were  in  Oakland,  one  at 
Sacramento,  one  at  Stockton,  one  at  San  Jose,  one  at  Santa 
Barbara,  two  at  San  Francisco  and  one  at  Petaluma. 

This  left  eighty-six  State  incorporated  commercial  and 
savings  banks  in  operation  on  January  1,  1877. 

Some  Early  Interior  Banks. 

The  ten  private  banks  in  operation  in  San  Francisco 
on  that  date  made  no  reports  for  publication,  and  of  course 
were  left  out. 


Banking  m  California  77 

Starting  on  January  1,  1877,  with  the  eighty-six  incor- 
porated banks  in  active  operation,  it  will  be  interesting  to 
trace  the  subsequent  growth  of  these  institutions  so  far  as 
possible. 

With  reference  to  such  banks  in  San  Francisco  this  has 
been  covered  as  completely  as  available  sources  of  informa- 
tion have  allowed. 

Many  of  the  interior  incorporated  commercial  banks 
which  were  in  the  race  in  1877  are  still  in  operation  and  un- 
der their  old  names.  Others  have  gone  into  the  national  sys- 
tem with  such  slight  change  in  name  as  was  necessary. 

Of  the  interior  commercial  banks  established  in  the  sixties 
and  still  in  existence  under  their  old  names  may  be  mentioned 
the  Stockton  Savings  and  Loan  Society,  organized  as  a  sav- 
ings bank  but  for  many  years  in  the  commercial  class;  the 
Bank  of  Sonoma  County  at  Petaluma,  the  Bank  of  San  Jose, 
the  San  Joaquin  Valley  Bank  at  Stockton  and  the  Bank  of 
Woodland,  the  last  named  three  being  organized  in  1868  and 
the  other  two  in  1867  and  1866.  The  Bank  of  Sonoma  County 
is  the  senior  in  this  list. 

Thirty-three  of  the  State  interior  commercial  banks  or- 
ganized in  the  seventies  were  still  doing  business  on  the  1st 
of  January,  1910. 

Those  of  the  1870  class  are  the  Santa  Rosa  Bank,  the 
Colusa  County  Bank  and  the  Petaluma  Savings  Bank. 

Those  of  the  1871  class  are  the  Farmers  and  Merchants 
Bank  of  Los  Angeles,  Bank  of  Gilroy  and  the  Bank  of  Napa. 
The  first  named  went  under  the  national  system  in  1903. 

The  Bank  of  Chico  appears  to  be  the  only  one  in  existence 
of  the  1872  class. 

Of  the  1873  class  there  remain  the  following:  Banks  of 
Butte  County,  Dixon,  Hollister  and  Martinez;  Farmers  and 
Merchants  Bank  of  Healdsburg,  Farmers  Co-operative  Union 
of  Sutter  County  at  Yuba  City,  Humboldt  County  Bank  of 
Eureka,  Salinas  City  Bank  and  Savings  Bank  of  Santa  Rosa. 


'^^  Banking  in  California 

There  are  ten  survivers  of  the  1874  class,  as  follows : 
Banks  of  Healdsburg,  Lake,  Tehama  Comity,  Ukiah,  Ventura, 
Visalia,  Watsonville  and  Wheatland;  Commercial  and  Sav- 
ings Bank  of  San  Jose,  Farmers  Savings  Bank  of  Lakeport 
and  Kern  Valley  Bank  at  Bakersfield. 

The  two  banks  of  the  1875  class  are  the  Sonoma  Valley 
Bank  at  Sonoma  and  the  Bank  of  Santa  Cruz  County  at 
Santa  Cruz.  The  last  named  went  under  the  national  system 
in  1910. 

The  Bank  of  Suisun  and  the  Citizens  Bank  of  Nevada 
City,  organized  in  1876,  were  still  in  operation  in  1910. 

The  Farmers  and  Merchants  Bank  of  Healdsburg,  or- 
ganized in  1877,  and  the  Modesto  Bank  of  1878  are  still  in 
the  field. 

The  years  1877,  1878  and  1879  were  not  favorable  to  the 
organization  of  banks  of  any  kind  in  any  part  of  the  State. 

In  their  first  report  for  July,  1878,  the  Bank  Commis- 
sioners could  find  only  eighty-four  incorporated  State  banks 
in  California,  of  which  fifty-six  were  classed  as  commercial 
and  twenty-eight  as  savings  banks. 

First  License  Under  Bank  Commission. 

The  Bank  Commissioners  issued  their  first  license  to  a 
bank  to  commence  business  in  1878,  and  from  that  time  imtil 
they  were  legislated  out  of  office  by  the  adoption  of  a  new 
system  for  the  supervision  of  banks  in  1909,  a  period  of 
thirty-one  years,  they  granted  hundreds  of  such  licenses. 

In  their  report  for  the  year  ending  August  11,  1900,  the 
Commissioners  reported  160  incorporated  commercial  banks 
in  operation  in  the  cities  and  towns  of  the  State  outside  of 
San  Francisco. 

At  least  39  of  these  banks  were  not  in  operation  under 
their  original  names  in  1908.  It  is  known  that  several  of 
these  had  in  the  meantime  gone  under  the  national  system. 


Banking  in  California  79 

The  39  which  retired  from  the  State  system  during  that 
interval  through  failure  or  the  process  of  conversion  were  all 
incorporated  between  1873  and  April,  1900. 

One  of  the  oldest  in  this  list  was  incorporated  in  1873, 
another  in  1874,  another  in  1875,  another  in  1881,  another  in 
1882,  four  in  1886,  eight  in  1887,  two  respectively  in  1888, 
1889  and  1890,  six  in  1891,  three  in  1893,  two  respectively  in 
1894  and  1898  and  one  respectively  in  1895,  1896  and  1900. 

It  will  be  noticed  that  three  of  these  retired  banks  were 
in  operation  prior  to  the  advent  of  the  Commissioners,  while 
all  the  others  received  their  licenses  to  transact  business  from 
these  officials. 

The  illustration  is  inserted  to  show  the  transitory  char- 
acter of  the  banking  business. 

Bank  Changes  Under  Commission. 

There  is  of  course  another  way  of  looking  at  this  feature. 
Of  the  160  incorporated  commercial  State  banks  in  operation 
in  the  interior  of  the  State  in  April,  1900,  it  is  known  that 
131  were  still  in  operation  in  July,  1908,  doing  business  at 
the  old  stands  and  under  the  old  names.  This  list  includes 
about  40  that  were  in  business  prior  to  1880. 

During  the  first  four  years  that  the  Bank  Commissioners 
were  in  service  there  were  not  many  new  banks  opened  in  the 
State  of  any  kind.  It  was  a  period  of  examination  and  of 
sifting  the  bad  from  the  good. 

From  the  84  incorporated  banks  reported  to  be  in  ex- 
istence by  the  Commissioners  on  July  1,  1878,  the  number 
was  cut  down  on  January  1,  1882,  to  76,  of  which  59  were 
classed  as  commercial  and  17  as  savings.  During  that  inter- 
val there  was  a  net  gain  of  three  commercial  banks  and  a  net 
loss  of  eleven  savings  banks.  Most  of  the  latter  had  gone 
into  voluntary  or  involuntary  liquidation. 

On  January  1, 1883,  the  Commissioners  reported  82  banks 
in  the  State  under  their  supervision,  a  net  gain  of  6.     A 


80  Banking  in  California 

similar  net  gain  was  reported  in  the  following  calendar  year, 
three  in  1884,  six  in  1885  and  one  for  1886. 

From  January  1,  1882,  to  the  close  of  1886,  the  number 
of  banks  had  been  increased  from  76  to  98,  a  net  gain  of  22. 
In  the  meantime  there  had  been  nearly  that  number  of  new 
banks  opened,  but  there  had  been  at  least  one  failure  and 
two  conversions  to  nationals. 

The  year  1887  was  characterized  by  great  activity  in  the 
starting  of  State  incorporated  banks.  Twenty-five  new  banks 
were  added  in  that  year.  Twenty  of  these  were  in  the  coun- 
ties south  of  San  Francisco,  including  five  in  San  Diego  Coun- 
ty, four  in  San  Bernardino  County  and  six  in  Los  Angeles 
County. 

On  January  1,  1888,  the  Commissioners  reported  121 
banks  under  their  supervision,  of  which  99  were  classed  as 
commercial  and  22  as  savings.  This  showed  a  net  gain  of  23. 
The  two  retirements  in  1887  were  the  Santa  Barbara  Savings, 
organized  in  1886,  but  changed  to  a  commercial  bank  in  the 
following  year,  and  the  Pasadena  Savings  Bank.  The  last 
named  was  organized  by  Caspar  T.  Hopkins,  for  many  years 
the  president  of  the  California  Insurance  Company  of  San 
Francisco.  Six  months  in  the  bank  business  satisfied  Mr. 
Hopkins,  who  honorably  retired  at  the  end  of  that  interval. 

In  the  same  report  29  private  banks  were  mentioned  as 
doing  business  in  the  State,  the  Legislature  making  it  ob- 
ligatory for  these  banks  to  report  to  the  Commissioners  in 
1887. 

Seventeen  more  new  banks  were  opened  in  1888,  of  which 
fifteen  were  commercial  and  two  savings.  Five  new  private 
banks  were  also  added,  making  a  total  gain  of  22. 

The  State  banks  reporting  for  January  1,  1889,  numbered 
172,  of  which  114  were  incorporated  commercial,  24  savings 
and  34  private.  The  Commissioners  also  reported  35  national 
banks,  against  33  the  year  before,  when  these  banks  first  sent 
in  statements  to  the  Commissioners. 


German  Savings  and  Loan   Society,   San   Francisco,    isGs 


Banking  in  California  81 

In  1889,  there  were  22  banks  incorporated,  of  which  14 
were  commercial  and  8  savings.  Three  commercial  banks  and 
7  private  banks  were  dropped,  5  of  the  last  named  by  incor- 
poration. Three  new  private  banks  were  started.  The  num- 
ber of  banks  reporting  for  January  1,  1890,  was  187,  of  which 
125  were  commercial,  32  savings  and  30  private,  a  net  gain 
of  15  for  1889. 

New  bank  incorporations  for  1890  embraced  18  commer- 
cial and  9  savings.  Two  commercials  retired,  one  for  want  of 
support  and  one  through  a  merger.  One  savings  changed  to 
commercial.  Several  private  banks  went  into  corporations. 
On  January  1,  1897,  the  number  of  banks  reporting  was  207, 
of  which  142  were  commercial,  41  savings  and  24  private. 
The  net  gain  for  the  year  was  20. 

In  1891,  there  was  a  net  gain  of  13  banks,  the  total  for 
January  1,  1892,  being  220,  of  which  133  were  commercial, 
49  savings  and  18  private.  Five  of  the  private  banks  dropped 
in  1891  changed  to  corporate  banks. 

The  failure  of  Belloe  &  Co.  in  March,  1891,  removed  the 
last  private  bank  from  San  Francisco,  though  in  the  early 
years  there  were  38  of  these  banks  in  operation  in  the  city. 

In  1892,  there  were  18  new  commercial  banks  and  9  sav- 
ings banks  added  to  the  State,  including  two  changes  from 
private  to  corporate.  Three  new  private  banks  were  also 
started.  Three  commercial  banks  retired.  The  number  re- 
porting for  business  on  January  1,  1893,  was  242,  of  which 
168  were  commercial,  57  savings  and  17  private.  One  sav- 
ings retired.    The  net  gain  for  the  year  1892  was  22  banks. 

In  1893,  the  banking  business  throughout  the  country  was 
in  a  state  of  considerable  unrest,  which  of  course  affected 
California,  though  not  so  seriously  as  some  of  the  other  States. 

Thirteen  new  commercial  and  four  savings  banks  were 
incorporated  in  the  State  during  that  year,  nine  of  the  former 
and  all  of  the  latter  in  the  first  six  months.  The  panic 
wave  of  1893  did  not  reach  this  Coast  until  June. 


82  Banking  in  California 

Several  banks  suspended,  but  in  most  cases  the  suspen- 
sion was  only  temporary.  The  net  gain  for  the  year  was  seven 
banks. 

On  the  1st  of  January,  1894,  the  Commissioners  reported 
249  banks  under  their  jurisdiction  in  operation,  of  which  175 
were  commercial,  60  savings  and  14  private. 

In  1894,  there  were  only  five  new  banks  opened,  all  of 
the  commercial  class.  Nine  commercials  and  one  savings  re- 
tired. A  national  bank  at  Petaluma  went  under  the  State 
system.  There  was  a  net  loss  of  two  banks  in  that  year,  the 
total  number  reporting  on  January  1,  1895,  being  247,  of 
which  171  were  commercial,  59  savings  and  17  private. 

In  1895,  there  was  one  savings  and  five  commercial  banks 
added.  The  retirements  were  3  savings  and  3  commercials, 
one  of  the  latter  by  a  merger.  The  number  of  banks  on  Jan- 
uary 1st  was  given  at  253,  of  which  175  were  commercial,  57 
savings  and  21  private. 

The  bank  of  Kingsburg  at  Kingsburg  was  removed  to 
San  Francisco  in  1895,  and  was  opened  in  the  month  of  Oc- 
tober as  the  Market  Street  Bank. 

There  was  a  net  loss  of  four  banks  for  the  year  ending 
November  30,  1896,  when  the  total  was  given  at  249. 

Between  the  last  named  date  and  March  5,  1898,  there 
were  two  new  commercials,  one  savings  and  two  privates 
added,  while  two  commercials  retired,  showing  a  net  gain  of 
only  three  banks.  The  total  number  reporting  was  252,  of 
which  171  were  commercial,  58  savings  and  23  private. 

In  1898,  three  savings  and  three  private  banks  were  cut 
out  and  three  commercials  inserted,  making  the  total  num- 
ber 249,  a  net  reduction  of  three  banks. 

For  the  year  ending  November  30,  1899,  two  savings  and 
two  private  banks  retired,  making  the  total  245,  a  further 
reduction  of  four  banks.  These  two  years  were  quite  unusual 
in  the  history  of  bank  making  in  the  State.  At  that  time 
there  were  174  commercial,  53  savings  and  18  private  banks 
in  operation  under  the  supervision  of  the  Commissioners. 


Banking  in  California  83 

The  subsequent  reports  more  nearly  followed  the  calen- 
dar years.  The  one  for  1900  was  submitted  on  December  23 
of  that  year,  when  251  banks  were  reported,  a  net  gain  of  6, 
all  in  the  commercial  class. 

In  1901,  there  was  a  further  net  gain  of  6  banks,  all  of 
the  savings  banks  order.  A  loss  of  two  commercial  banks 
was  offset  by  a  gain  of  two  private  banks.  The  total  at  the 
end  of  that  year  was  257. 

In  1902,  there  was  a  net  gain  of  16  commercials,  3  sav- 
ings and  1  private,  making  an  addition  of  20  banks,  and  in- 
creasing the  total  to  277. 

The  next  report  was  dated  January  28,  1904.  In  the 
interval  of  about  thirteen  months  there  was  a  net  gain  of  25 
commercial  and  11  savings,  and  a  net  loss  of  one  private,  or  a 
total  net  gain  of  35,  making  the  grand  total  312. 

In  the  following  twelve  months,  there  was  a  net  gain 
of  37  commercials,  18  savings  and  two  privates,  swelling  the 
total  to  369,  a  net  gain  of  57  banks,  the  largest  ever  reported. 

For  the  calendar  year  of  1905,  there  was  a  net  gain  of 
27  commercial,  22  savings  and  8  private  banks,  or  a  total 
of  57  banks,  just  the  same  as  in  1904,  the  grand  total  being 
426. 

In  1906,  there  was  a  net  gain  of  47  commercials,  16  sav- 
ings and  6  privates,  or  a  total  of  69  banks,  making  a  total 
of  495. 

In  1907,  there  was  a  net  gain  of  21  commercials  and  1 
savings  and  a  net  decrease  of  17  privates,  thus  reducing  the 
net  gain  to  5  and  making  the  grand  total  just  500. 

In  1908,  there  was  a  net  gain  of  8  commercials  and  1 
savings  and  a  loss  of  4  privates,  making  the  grand  total  505, 
a  net  gain  of  five  banks. 

The  last  report  of  the  Commissioners  is  dated  April  28, 
1909.  This  gives  the  number  of  banks  in  the  State  as  494,  a 
decrease  of  11.  These  consisted  of  348  commercials,  131  sav- 
ings and  15  private  banks. 


84 


Banking  in  California 


All  California  Banks  Under  State  Supervision. 

(OOO's  omitted) 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1876 

91 

$49,  206 

$    7,789 

$119,835 

$129,  413 

$182, 460 

1877 

92 

55, 178 

11,294 

129, 103 

146,  687 

188, 763 

1878 

84 

46,  231 

6,442 

100, 128 

106,118 

151,932 

1879 

83 

45,  921 

7,039 

76,  730 

83, 990 

126, 155 

1880 

78 

35,  836 

8,923 

79,  278 

70, 508 

119,575 

1881 

77 

34,  774 

17,  880 

81,125 

73, 072 

121,406 

1882 

76 

35, 316 

18,  828 

86,  392 

74, 998 

128, 088 

1883 

82 

37, 859 

22,266 

93, 037 

77,814 

137,  597 

1884 

88 

41,  832 

20, 785 

97,273 

91,384 

145, 933 

1885 

91 

43,  837 

19, 937 

95,  768 

98,  502 

151,236 

1886 

97 

46, 831 

16, 364 

92, 273 

103, 059 

150, 735 

1887 

98 

44,  979 

19,214 

110,790 

107,  386 

163, 690 

1888 

150 

58,  298 

24,  733 

133,  376 

134,  561 

201,393 

1889 

172 

63,  342 

22, 071 

139, 660 

143,  916 

211,720 

1890 

187 

68, 338 

20, 881 

148, 651 

160,  944 

226,  393 

1891 

207 

72, 515 

21, 165 

163, 140 

177,620 

246, 031 

1892 

220 

76, 245 

22,849 

178,033 

192,  892 

264, 000 

1893 

242 

79,  459 

23,  846 

194,  761 

212,  270 

286, 134 

1894 

242 

78,911 

18,313 

177, 377 

194,  830 

265,860 

1895 

247 

76, 519 

22, 002 

180, 687 

190,  807 

271,379 

1896 

253 

76,  660 

31,188 

186,065 

186,  990 

276, 678 

1897 

249 

66,  697 

35, 055 

182,808 

174,  249 

263, 053 

1898 

252 

60,457 

44,517 

195, 075 

165,  582 

267,  912 

1899 

249 

64,  733 

50,  816 

212,171 

167,  326 

286, 247 

1900 

245 

60,  901 

70, 585 

240, 612 

170, 302 

316,015 

1901 

251 

63,249 

77,  291 

258,928 

177,  723 

334, 045 

1902 

257 

66,  242 

84,  755 

290, 076 

194, 922 

371,548 

1903 

277 

75, 506 

97, 301 

335,  416 

228, 768 

426, 924 

1904 

312 

86, 166 

105, 624 

350, 904 

253, 102 

456, 312 

1905 

369 

93,  778 

104,411 

378,074 

281,574 

490,  413 

1906 

426 

91,614 

108,944 

433,308 

322, 722 

549,  652 

1907 

495 

100,  372 

114,464 

500, 782 

366,  993 

632, 866 

1908 

500 

107, 055 

105, 638 

437,  405 

358, 067 

587,  795 

1909 

505 

104,  802 

101,157 

409, 670 

321,895 

546, 869 

1909 

494 

103, 202 

104,  468 

421,572 

324,  410 

552, 353 

*1910 

477 

93, 140 

107, 556 

440, 232 

339, 893 

554,  283 

*March  29,  1910. 


Banking  in  California  85 

The  first  statement  in  the  foregoing  table  is  for  Decem- 
ber 31,  1876,  and  is  from  the  second  semi-annual  publication 
of  reports  under  the  law  of  1876.  The  following  four  state- 
ments are  for  July  1st  in  the  years  named.  The  subsequent 
reports  are  for  January  1st  until  1896,  when  three  reports 
were  demanded  instead  of  two.  The  third  report  for  each  of 
the  subsequent  years  has  been  compiled  from  that  nearest  to 
the  1st  of  January,  which  has  been  generally  fixed  about  the 
end  of  December. 

The  totals  are  given  in  thousands  of  dollars,  and  the 
capital,  surplus  and  undivided  profits  have  been  combined  for 
the  sake  of  brevity. 

The  investments  are  exclusive  of  real  estate  holdings, 
whether  in  the  form  of  bank  premises  or  property  taken  for 
debt,  being  restricted  to  bonds,  stocks  and  personal  securities, 
much  of  which  are  interest  bearing. 

The  deposits  are  exclusive  of  moneys  due  banks  and  all 
public  moneys. 

The  loans  comprise  all  descriptions  allowed  the  several 
classes  of  banks  under  the  laws  of  the  State. 

The  statements  from  1876  to  1887,  both  years  inclusive, 
are  confined  to  the  incorporated  commercial  and  savings  banks 
under  the  supervision  of  State  officials. 

Statements  from  the  private  banks  of  the  State  were  first 
incorporated  in  the  report  for  January,  1888,  and  appear 
in  all  the  subsequent  statements.  It  was  only  in  1887  that 
the  private  banks  were  ordered  to  file  semi-annual  statements 
with  the  Commissioners.  It  was  several  years  later  that  the 
Commissioners  were  empowered  to  examine  the  private  banks 
in  addition  to  their  other  duties. 

Private  banks  have  existed  in  the  State  from  the  start, 
and  the  number  has  varied  from  15  to  40.  The  first  state- 
ment to  the  Commissioners  embraced  29  of  these  banks. 

The  variations  in  the  items  covered  in  the  foregoing  state- 
ments are  mainly  due  to  business  depressions  through  im- 
pairment of  confidence,  either  of  a  local  or  general  character. 


8^  Banking  in  California 

Unsound  banking  in  isolated  cases,  whether  due  to  ig- 
norance or  from  criminal  intent,  have  often  caused  the  best 
managed  banks  much  trouble  and  some  loss.  Conscientious 
bankers  have  a  right  to  insist  that  all  who  engage  in  the 
business  shall  maintain  a  high  standard  or  go  to  the  wall. 

National  Bank  Progress  in  California. 

Thus  far  in  this  story  general  consideration  has  been 
mainly  confined  to  only  one  form  of  banking,  namely,  that 
known  as  the  State  bank  system. 

In  this  State,  as  elsewhere,  the  national  bank  system  has 
been  in  operation  for  many  years. 

California  did  not  take  to  this  system  as  promptly  and 
as  cordially  as  most  of  the  other  States,  because  she  did  not 
like  the  conditions  imposed  of  using  as  currency  notes  of 
such  variable  value  as  those  in  circulation  as  money  on  the 
other  side  of  the  country. 

Besides,  there  was  no  necessity  here  for  pursuing  thai; 
course,  even  if  the  State  could  have  been  assured  of  an  ample 
and  permanent  supply  of  that  kind  of  money. 

"With  the  banks  and  bankers  on  the  other  side  of  the 
country,  the  adoption  and  use  of  national  currency  was  not  a 
question  of  choice,  but  one  of  necessity. 

Coin  money  was  relatively  as  scarce  when  this  new  bank- 
ing system  was  introduced  on  the  Atlantic  Coast  as  paper 
money  was  on  the  Pacific  Coast.  Furthermore,  while  not  dar- 
ing to  interfere  with  the  right  of  State  banks  to  issue  notes 
to  be  used  as  currency,  Congress  did  virtually  interpose  its 
objection  to  the  further  use  of  that  privilege  by  the  adoption 
of  an  act  imposing  a  tax  of  10  per  cent  on  State  bank  note 
circulation. 

California  not  only  at  first  refused  to  use  the  national 
paper  currency  as  a  circulating  medium,  but  by  its  organic 
act  denied  the  State  banks  the  privilege  of  issuing  notes  for 
their  own  use  as  money 


Banking  in  California  87 

But  for  one  fortunate  circumstance,  banking  in  Cali- 
fornia would  have  been  up  against  a  hard  proposition.  It 
had  a  source  of  relief  for  its  monetary  system  that  no  other 
section  of  the  country  possessed,  or  at  least  that  no  other 
section  of  the  country  had  discovered  in  suitable  volume. 

It  had  an  abundance  of  the  raw  material  from  which 
the  best  money  of  the  world  has  ever  been  made.  Hence  its 
thorough  independence  and  its  Gibraltar  position  on  the  cur- 
rency question.  While  the  value  of  the  national  paper  cur- 
rency was  bobbing  up  and  down  like  a  cork  on  the  wavea, 
California  handled  such  currency  as  it  handled  other  forms 
of  merchandise,  and  it  was  bought  and  sold  daily  by  brokers. 

It  was  owing  to  this  condition  of  things  that  State  in- 
corporated banking  secured  a  start  of  ten  years  over  national 
banking  in  California.  The  interval  of  delay  would  have 
been  much  longer  if  Congress  had  not  conceded  California's 
idea  of  a  paper  currency  by  the  passage  of  an  act  amendatory 
of  the  national  bank  act,  which  provided  for  the  establish- 
ment of  gold  note  banks,  such  notes  to  be  redeemable  in  gold 
coin  upon  demand  by  the  banks  issuing  the  same. 

This  proved  to  be  a  good  object  lesson  in  the  interest  of 
sound  banking  not  only  in  the  country,  but  throughout  the 
world.  It  undoubtedly  hastened  the  return  to  specie  pay- 
ments in  the  United  States  and  the  adoption  by  Congress  of 
a  monetary  standard  that  has  no  superior  in  any  part  of  the 
world,  and  which  has  for  many  years  maintained  all  its  varied 
forms  of  money  on  the  gold  coin  parity  basis. 

Though  the  adoption  of  the  national  banking  system  in 
California  did  not  occur  until  nearly  twenty  years  after  it 
was  introduced  and  put  in  operation  in  nearly  every  other 
State  in  the  country,  it  has  gained  at  last  a  prominent  posi- 
tion in  fiscal  affairs  and  one  that  bids  fair  to  become  as  per- 
manent as  it  already  is  prominent. 

The  history  of  national  banking  in  California,  though 
more  or  less  familiar  to  those  directly  engaged  in  it,  is  a  story 
of  considerable  interest  to  the  general  public. 


88  Banking  in  California 

The  first  bank  of  this  character  established  in  the  State 
was  of  course  a  gold  note  bank.  This  was  organized  in  San 
Francisco  in  November,  1870,  and  was  formally  opened  for 
business  at  the  beginning  of  the  following  year.  The  first 
lot  of  gold  notes  for  circulation  in  the  State  did  not  arrive 
until  March,  1871. 

These  notes  looked  very  good  and  readily  passed  from 
hand  to  hand  because  of  the  promised  form  of  redemption 
which  they  bore.  The  bank  to  which  these  notes  were  con- 
signed occupied  the  building  on  the  southwest  corner  of  Mont- 
gomery and  Sacramento  streets,  and,  while  the  notes  that  went 
out  of  the  doors  of  that  building  were  accepted  at  their  full 
face  value,  brokers  on  the  comer  directly  opposite  were  sell- 
ing United  States  notes  for  85%c  to  92%c  in  coin  to  the  dollar, 
the  average  for  1871  for  such  notes  being  90c  on  the  par 
value. 

The  bank  then  and  there  established  is  still  doing  busi- 
ness, not  at  the  old  corner  nor  exactly  under  the  old  name. 
The  bank,  however,  has  always  been  located  on  a  corner.  Upon 
the  completion  of  the  Nevada  Building,  it  moved  into  the 
southwest  corner  of  that  structure  at  Montgomery  and  Sum- 
ner streets.  Later  it  purchased  the  northwest  corner  of  Bush 
and  Sansome  streets,  and  erected  a  substantial  four-story 
building  of  its  own,  occupying  the  main  floor  for  its  general 
offices  and  the  basement  for  safe  deposit  department  and 
vaults. 

It  was  in  that  building  when  the  great  fire  of  April,  1906, 
destroyed  the  greater  part  of  the  business  district  of  the  city. 
The  walls  of  the  first  story  were  saved  and  roofed  and  fur- 
nished a  temporary  place  for  the  business  of  the  bank  until 
the  completion  of  its  new  skyscraper  building  at  the  north- 
west corner  of  Montgomery  and  Post  streets,  a  structure  of 
which  the  city  is  and  well  may  be  proud. 

This  bank  was  organized  as  the  First  National  Gold  Note 
Bank,  with  a  capital  of  $1,000,000.  "When  specie  pajnnents 
were  resumed  by  the  Government  in  January,  1879,  and  when 


Banking  in  California  89 

every  paper  note  dollar  was  as  good  as  gold  coin  in  all  parts 
of  the  country,  there  was  no  further  need  of  maintaining  the 
specific  name  of  gold  note  banks,  and  all  the  banks  of  that 
character  that  had  been  organized  in  California,  the  only  State 
that  had  given  them  a  place,  surrendered  their  charters  and 
accepted  those  common  to  all  other  national  banks. 

The  difference  between  these  gold  note  and  currency  na- 
tional banks,  apart  from  the  feature  pertaining  to  the  redemp- 
tion of  notes,  consisted  in  the  percentage  of  notes  allowed  for 
circulation  on  the  Government  bonds  deposited  for  that  pur- 
pose. The  currency  banks  were  then  receiving  in  notes  for 
circulation  90  per  cent  of  the  face  value  of  the  bonds  de- 
posited, while  the  gold  note  banks  were  allowed  only  80  per 
cent. 

This  fact,  in  connection  with  the  determination  of  the 
Government  to  maintain  all  its  paper  money  on  a  par  with 
a  coin  standard,  led  the  change  from  the  gold  note  to  the  cur- 
rency system.  Later  on  the  Government  allowed  all  the 
national  banks  to  take  out  notes  for  circulation  for  the  full 
par  value  of  the  bonds  deposited. 

The  First  National  of  San  Francisco  did  not  have  to  wait 
long  for  associates.  The  first  to  join  its  company  in  the  city 
was  the  National  Gold  Bank  and  Trust  Company,  in  1872. 
This  was  effected  through  the  conversion  of  the  California 
Trust  Company,  a  State  bank  organized  in  1867. 

There  were  no  further  additions  to  the  system  in  San 
Francisco  for  several  years,  but  in  the  interior  there  was  con- 
siderable activity  in  forming  such  organizations. 

Oakland  promptly  put  two  in  the  field  under  the  names 
of  First  and  Union.  The  first  named  is  still  flourishing  and  is 
stronger  than  at  any  previous  time  in  its  history.  The  Union 
was  obliged  to  close  in  April,  1909,  after  an  existence  of  34 
years,  having  been  organized  on  May  20,  1875. 

Six  others  were  organized  at  different  points  in  the  in- 
terior between  1871  and  1875,  both  years  inclusive. 


^0  Banking  in  California 

There  were  the  First  National  Gold  Bank  of  D.  O.  Mills 
&  Co.  of  Sacramento,  the  First  of  Stockton,  Petaluma,  Santa 
Barbara  and  San  Jose  and  the  Santa  Barbara  County 
National. 

At  the  expiration  of  its  charter,  the  First  of  Petaluma 
went  under  the  State  system.  The  National  Gold  and  Trust 
Company  retired  in  1879,  so  that  of  the  ten  gold  note  national 
banks  in  operation  in  the  State  on  the  1st  of  January,  1877, 
seven  remain. 

These  ten  banks  formed  the  nucleus  about  which  has 
since  been  gathered  a  considerable  host. 

In  the  report  of  these  ten  banks  for  December  31,  1876, 
it  is  learned  that  their  paid-up  capital  was  $4,520,000 ;  reserve 
and  surplus,  $344,300;  individual  deposits,  $3,202,000;  loans 
and  discounts,  $5,945,500 ;  investments,  $519,500. 

The  First  National  of  San  Francisco,  the  statement  of 
which  is  included  in  the  above  totals,  reported  a  paid-up  capi- 
tal of  $2,000,000  and  individual  deposits  of  $1,228,000. 

After  this  first  spurt  in  the  organization  of  these  banks, 
there  was  a  comparative  lull  in  that  kind  of  business  for 
several  years.  These  nine  banks  were  organized  prior  to 
December,  1875.  That  was  the  number  reporting  for  that 
date  and  also  on  the  following  three  years.  The  dropping 
of  a  bank  in  San  Francisco  in  1879  reduced  the  number  of 
these  banks  in  the  State  in  October  of  that  year  to  eight. 

The  First  of  Los  Angeles  was  organized  in  August,  1880, 
from  a  State  bank  which  had  been  in  existence  since  1875. 
Eesources  are  now  over  $18,000,000. 

One  new  bank  was  added  in  1881,  another  in  1882  and 
four  in  1883,  and  one  in  1884.  This  brought  up  the  number 
to  15  in  1883,  which  was  also  the  number  up  to  March,  1885. 

In  response  to  a  personal  request  from  the  writer,  the 
comptroller  forwarded  an  abstract  of  the  condition  of  the 
national  banks  in  California  as  reported  to  him  on  March 
10,  1885. 


Banking  in  California  91 

The  national  banks  in  operation  in  the  State  on  that 
date  were  fifteen,  as  follows:  Alameda  First;  Los  Angeles 
First  and  Los  Angeles;  Modesto  First;  Oakland  First  and 
Union;  Petaluma  First;  Sacramento,  D.  O.  Mills  &  Co.;  San 
Francisco  First ;  San  Jose  First ;  San  Diego  First  and  Consoli- 
dated; Santa  Barbara  First  and  Santa  Barbara  County;  and 
Stockton  First. 

These  banks  reported  a  paid-up  capital  of  $3,550,000,  of 
which  $1,500,000  was  represented  by  the  single  bank  in  San 
Francisco.  The  surplus  fund  and  undivided  profits  of  these 
banks  amounted  to  $1,183,700;  individual  deposits,  $6,409,- 
600 ;  loans  and  discounts,  $7,487,100 ;  investments,  $1,833,500 ; 
and  resources,  $12,956,800. 

The  amount  of  the  circulating  notes  issued  to  these  banks 
was  $1,357,590,  and  with  the  exception  of  $970,  the  entire 
amount  was  out. 

Two  of  the  four  banks  added  in  1883  were  the  Los  An- 
geles of  Los  Angeles  and  the  First  of  San  Diego,  while  the 
First  of  Modesto  was  added  in  February,  1884. 

There  was  a  net  gain  of  two  in  1885,  which  were  the 
First  of  Fresno  (converted  from  State)  and  the  First  of 
Eiverside.  This  brought  the  number  reporting  to  the 
comptroller  in  the  fall  of  1885  to  17. 

This  was  the  total  net  gain  in  the  operation  of  the  sys- 
tem in  the  State  for  the  first  fifteen  years. 

Just  at  this  point  quite  a  change  took  place  in  the  organi- 
zation of  these  banks.  New  interest  was  developed  and  a 
quickened  movement  followed.  The  first  charter  issued  to 
national  banks  began  to  expire  in  1882,  and  Congress  in  that 
year  provided  for  a  further  extension  of  such  charters  for 
another  score  of  years. 

The  amendments  made  to  the  national  bank  laws  at  the 
same  time  were  of  a  more  favorable  character,  and  this  wasr 
probably  the  cause  of  the  new  and  enlarged  interest  mani- 
fested. 

Seven  new  national  banks  came  into  existence  in  1886, 


^2  Banking  in  California 

one  in  San  Francisco,  one  in  Santa  Rosa  and  the  other  five 
in  the  southern  part  of  the  State. 

The  one  in  San  Francisco  was  the  Crocker- Woolworth, 
which  was  organized  from  the  State  bank  of  that  title.  The 
one  at  Santa  Rosa  was  given  the  name  of  Santa  Rosa. 

The  five  opened  in  the  southern  section  were  the  First 
and  Pasadena  Nationals  of  Pasadena,  Merchants  of  Los  An- 
geles and  First  of  Pomona  and  Santa  Ana. 

That  was  the  best  work  done  along  this  line  up  to  that 
time,  but  just  twelve  months  later  the  comptroller  reported 
thirty-three  of  these  banks  in  operation  in  the  State,  so  there 
must  have  been  a  net  addition  of  nine  during  that  interval. 

The  names  of  the  nine  new  banks  reporting  for  the  first 
time  in  1887  include  one  at  each  of  the  following  points :  Col- 
ton,  Grass  Valley,  Merced,  Monrovia,  San  Bernardino,  San 
Diego,  San  Francisco,  San  Jose  and  St.  Helena. 

It  will  be  noticed  that  six  of  the  above  banks  were 
located  south  of  San  Francisco.  The  one  opened  in  this  city 
was  the  California,  which  survived  just  two  years.  The  one 
at  St.  Helena  was  the  Carver  National,  previously  a  private 
bank. 

Creating  sixteen  new  banks  of  this  character  in  two  years 
was  considered  remarkable  work  and  made  a  total  of  thirty- 
three  in  operation  at  the  close  of  1887. 

These  banks  reported  a  paid-up  capital  of  $6,925,000; 
reserve  and  surplus,  $2,083,000;  individual  deposits,  $22,- 
883,300;  loans  and  discounts,  $19,788,000;  stocks  and  bonds, 
$3,347,500;  resources,  $35,235,600.  They  had  circulating 
notes  of  $1,654,000  and  all  in  circulation  except  $29,400. 

There  was  a  net  gain  of  five  banks  in  1888,  two  of  which 
were  the  Fresno  National  and  the  First  of  Redlands.  The 
names  of  the  others  are  not  recalled. 

Three  banks  retired  in  1888.  These  were  the  First  of 
Alameda,  which  went  under  the  State  system;  the  First  of 
Grass  Valley,  which  was  absorbed  by  the  Citizens  Bank;  and 


Banking  in  California  ^3 

the  California  National  of  San  Francisco,  which  suspended  in 
December  of  that  year. 

Some  of  the  banks  organized  in  the  latter  part  of  1888 
were  not  reported  until  the  following  year,  when  their  state- 
ments first  appeared.  The  official  report  gave  the  names  of 
seven  new  banks  in  operation  in  December,  1889,  that  were 
not  in  the  list  at  the  same  time  in  the  previous  year. 

These  new  banks  were  the  National  Bank  of  California 
and  the  National  of  Southern  California,  both  in  Los  Angeles, 
the  California  National  of  San  Diego,  the  San  Bernardino 
National  and  the  First  of  San  Luis  Obispo,  Santa  Monica  and 
Santa  Paula.    Two  of  these  opened  in  the  last  half  of  1889. 

In  the  following  decade  there  was  but  little  progress  in 
the  organization  of  these  banks.  In  fact,  they  did  not  always 
hold  their  own,  for  while  there  were  38  in  operation  in  1888 
and  the  same  number  in  1900,  the  number  during  the  interval 
dropped  to  31.  This  was  the  number  in  December,  1894,  and 
the  same  number  was  reported  in  the  fall  of  1895  and  1896. 

Occasionally  a  new  bank  was  reported  during  the  decade 
ending  with  1900,  but  the  retirements  were  more  frequent. 

The  National  Bank  of  Pomona  came  into  existence  in 
December,  1891;  the  Merchants  National  of  San  Diego  in 
April,  1893;  the  San  Francisco  National  in  December,  1897; 
the  Navada  National  in  January,  1898 ;  the  Farmers  National 
of  Fresno  in  June,  1899 ;  and  the  First  National  of  Berkeley 
and  the  First  National  of  Selma  in  June,  1900.  The  bank 
of  Selma  was  the  outcome  of  a  State  bank  that  was  organized 
thirteen  years  previous. 

From  31  banks  in  the  fall  of  1896,  there  was  a  net  gain 
of  only  four  in  the  following  three  years.  This  brought  the 
total  up  to  35,  where  it  remained  until  the  close  of  April, 
1900.  Four  new  banks  came  into  operation  in  the  last  eight 
months  of  that  year. 

This  was  the  beginning  of  a  new  upward  movement  in 
the  organization  of  these  banks,  which  later  on  developed  a 
degree  of  activity  previously  unknown. 


^^  Banhing  in  California 

There  was  a  gain  of  five  new  banks  in  each  of  the  fol- 
lowing two  years,  bringing  the  number  up  to  49  in  the  fall 
of  1902. 

In  the  next  seven  years  the  net  gains  were  12  for  the 
first  year,  14  for  the  second,  20  for  each  of  the  following  two 
years,  then  13,  15  and  16,  respectively,  for  the  last  three  years. 

This  brought  the  number  up  to  159  on  the  1st  of  Septem- 
ber, 1909,  of  which  10  were  in  San  Francisco,  9  in  Los  An- 
geles and  140  in  the  other  cities  and  towns  of  the  State. 

In  the  following  seven  months,  ending  March  29,  1910, 
there  was  a  further  gain  of  17  banks. 

One  of  the  new  banks  added  in  that  interval  was  the 
transfer  of  the  business  of  the  Bank  of  California,  a  State 
bank,  to  the  national  system. 

The  Bank  of  California  was  not  only  the  oldest  incor- 
porated commercial  bank  of  the  State,  but  decidedly  the 
largest  in  that  class.  The  conversion  of  this  bank  to  the 
national  system  was  an  event  of  considerable  importance. 

It  has  made  the  national  system  the  controlling  factor 
in  the  banking  business  of  San  Francisco.  This  control  is 
not  only  likely  to  be  permanent,  but  is  also  likely  to  develop 
increasing  strength  from  year  to  year. 

This  is  not  all.  The  acquisition  of  this  bank  to  the 
national  system  gives  to  San  Francisco  more  than  one-half 
of  the  total  resources  of  all  the  national  banks  in  the  State. 
Here  are  the  total  resources  of  these  California  national  banks 
as  copied  from  the  official  abstract  of  March  29,  1910: 

Banks  Resources 

San  Francisco 11        $199,351,632.50 

Los  Angeles 9  66,986,779.25 

Other  sections  in  State 156  127,102,884.40 

Total 176        $393,441,296.15 

These  resources  show  an  average  of  $18,123,000  for  the 
San  Francisco  banks,  $7,443,000  for  the  Los  Angeles  banks 


Banking  in  California  95 

and  $815,000  for  all  the  banks  in  the  system  outside  of  the 
two  reserve  cities. 

This  is  the  first  time  that  these  reports  have  given  to 
San  Francisco  this  preponderance  of  financial  power  in  the 
State. 

It  is  presumed  that  these  national  bankers  of  San  Fran- 
cisco will  not  only  use  the  influence  of  their  financial  posi- 
tion for  the  furtherance  of  the  best  material  interests  of  the 
city,  but  will  also  in  every  legitimate  way  seek  to  develop 
and  foster  all  the  resources  of  the  State  and  Coast. 

In  no  other  way  can  they  better  protect  and  prosper 
their  own  individual  interests.  Men  of  ordinary  common 
sense  admit  the  correctness  of  this  proposition,  and  when  left 
to  act  on  their  own  good  judgment  pursue  that  course  with 
unfaltering  fidelity. 


96 


Banking  in  California 


National  Banks  in  California. 

(OOO's  omitted) 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1872 

1 

$  1,041 

$     500 

$     199 

$   852 

$   1,517 

1873 

2 

3,163 

1,757 

3,144 

4,903 

8,068 

1874 

5 

3,491 

2,542 

3,193 

4,443 

9,591 

1875 

6 

3,954 

2,641 

2,108 

6,708 

12,293 

1876 

9 

5,314 

2,800 

2,172 

5,655 

11,648 

1877 

9 

4,864 

520 

3,202 

5,946 

11,846 

1878 

9 

4,726 

1,818 

2,985 

5,254 

9,482 

1879 

9 

4,777 

1,875 

3,403 

5,390 

10, 070 

1880 

8 

3,989 

1,836 

2,870 

4,568 

8,721 

1881 

10 

3,675 

1,964 

3,873 

5,058 

9,681 

1882 

11 

4,058 

1,970 

6,165 

6,476 

12, 794 

1883 

11 

4,201 

2,140 

7,434 

7,690 

13,  992 

1884 

15 

4,606 

2,165 

8,124 

8,175 

14,782 

1885 

15 

4,656 

1,593 

6,531 

7,519 

12,840 

1886 

17 

5,179 

1,963 

8,291 

9,095 

15, 425 

1887 

27 

7,455 

2,614 

14,378 

14,110 

24, 626 

1888 

34 

8,321 

2,566 

21,959 

20, 254 

34,526 

1889 

35 

10, 391 

2,042 

18,681 

19, 551 

32, 001 

1890 

37 

11,480 

2,809 

16,  794 

19, 730 

31, 532 

1891 

37 

12, 045 

3,033 

18, 490 

20, 765 

33,435 

1892 

35 

11,560 

2,872 

18,566 

21,014 

34, 133 

1893 

36 

11,757 

2, 715 

17,412 

19, 923 

32, 918 

1894 

35 

11,455 

2,012 

13, 588 

16, 583 

28,  705 

1895 

31 

10, 761 

2,657 

14,862 

17,075 

29,  331 

1896 

31 

10, 914 

3,400 

16, 034 

18, 390 

30, 880 

1897 

31 

10, 983 

3,450 

15, 930 

17, 453 

31, 195 

1898 

34 

14, 143 

4,258 

24, 980 

23,437 

48, 135 

1899 

35 

14,219 

6,744 

30, 382 

27, 249 

55, 365 

1900 

35 

14,311 

7,312 

34, 465 

29,  413 

61,998 

1901 

41 

15,015 

9,121 

36, 427 

34, 770 

67, 125 

1902 

46 

15, 901 

11,699 

45, 302 

41,754 

80, 683 

1903 

53 

20, 842 

20, 137 

61,061 

56,779 

111,119 

1904 

68 

26,498 

26, 625 

70, 995 

66, 547 

132,437 

1905 

79 

29, 537 

25, 940 

73, 895 

69, 551 

143,  789 

1906 

104 

39, 906 

32, 305 

106, 993 

104, 486 

209, 267 

^  1907 

123 

45, 226 

52, 537, 

143, 723 

141, 142 

276, 091 

1908 

132 

50,513 

56, 873 

113,055 

118,314 

238, 769 

1909 

145 

57, 410 

59, 714 

134,719 

130,715 

274, 093 

1910 

169 

63, 598 

60, 969 

163,852 

169, 331 

326, 723 

1910 

176 

82,265 

71,252 

171,445 

202, 490 

393, 441 

Humboldt  Savings  Bank,   San  Francisco,  1869 


Banking  in  California  97 

Locations  of  National  Banks. 

Though  San  Francisco  was  the  first  place  in  California 
to  give  hospitality  to  national  banks,  and  though  eight  of 
the  first  ten  were  located  in  the  central  and  northern  part  of 
the  State,  by  far  the  largest  number  in  operation  in  1910 
were  located  in  the  cities  and  towns  in  the  southern  part  of 
the  State,  and  many  of  these  south  of  Tehachapi. 

An  analysis  of  the  locations  of  154  of  these  banks  in 
operation  in  the  State  about  the  middle  of  the  year  1909 
showed  that  116  of  them  were  doing  business  in  communities 
south  of  San  Francisco,  and  a  good  proportion  of  this  num- 
ber in  the  extreme  southern  counties. 

This  is  equal  to  75  per  cent  of  the  whole  number.  At 
that  time  Los  Angeles  County  led  all  the  other  counties  of 
the  State  by  a  large  majority,  reporting  the  existence  of  45 
of  these  banks,  while  the  next  largest  total  was  11,  and  this 
honor  was  equally  divided  between  San  Bernardino  and 
Fresno  Counties. 

Yet  up  to  1880  these  southern  counties  reported  only  two 
of  these  banks  in  operation.  Los  Angeles  did  not  have  a  bank 
of  this  kind  until  1880  and,  then  it  made  one  out  of  jbl  State 
bank  that  was  started  five  years  previously. 

This  rapid  development  of  national  banks  in  the  lower 
part  of  the  State  is  easily  understood  when  all  the  facts  are 
known. 

For  many  years  these  southern  counties  have  claimed 
much  attention  from  people  accustomed  to  handling  paper 
money  and  with  doing  business  with  currency  banks.  This 
remark  applies  not  only  to  the  tourists  from  the  Eastern 
States  who  spend  a  portion  of  the  winter  season  in  that  sec- 
tion, but  also  to  the  large  permanent  population  obtained 
from  the  same  eastern  sources. 

Upon  coming  to  the  Coast,  it  is  quite  natural  that  these 
people  fresh  from  the  East  should  patronize  the  same  class  of 


9S  Banking  in  California 

banks  with  which  they  did  business  on  the  other  side  of  the 
country. 

Bankers  and  those  who  desired  to  become  bankers  in 
the  southern  part  of  the  State  quickly  grasped  the  situation 
and  availed  themselves  of  the  first  opportunity  to  provide  the 
kind  of  banking  that  such  a  large  proportion  of  the  several 
communities  seemed  to  want. 

Favorable  Amendments  to  System. 

The  national  bank  system  has  many  admirable  features, 
some  of  which  it  did  not  possess  in  the  original  draft  of  the 
act  or  in  the  first  supplemental  act. 

The  amendments  added  by  Congress  from  time  to  time 
have  been  generally  of  a  favorable  character,  growing  out 
of  the  personal  experiences  of  those  conducting  banks  under 
the  system. 

The  general  thought  in  these  amendments  and  alterations 
has  been  along  the  line  of  adaptation  to  new  conditions  and 
to  the  varied  circumstances  of  different  communities,  and  all 
for  the  single  purpose  of  making  the  banks  more  popular, 
thus  increasing  their  number  and  efficiency. 

At  first  the  amount  of  notes  for  circulation  was  limited 
to  90  per  cent  of  the  par  of  the  Government  bonds  deposited. 
This  was  eventually  raised  par  to  par. 

Despite  the  advantage  of  having  notes  to  loan  at  current 
rates  of  interest  to  the  face  value  of  the  bonds  also  drawing 
interest,  and  being  allowed  to  invest  the  entire  capital  in  bonds 
to  attain  that  result,  the  banks  have  never  availed  themselves 
of  their  full  privileges  along  this  line. 

According  to  the  statement  for  March  29,  1910,  these 
banks  had  a  paid-up  capital  of  $44,400,000,  but  only  $34,506,- 
000  in  notes  for  circulation  outstanding.  Despite  this  large 
amount,  paper  money  is  not  at  all  plentiful  in  this  State. 

For  many  years  no  national  bank  could  be  organized  in 
any  part  of  the  country  with  a  capital  of  less  than  $50,000. 


Banking  in  California  99 

Under  the  Act  of  March  14,  1900,  the  minimum  amount  of 
capital  required  to  start  one  of  these  banks  has  been  $25,000. 

This  has  made  a  national  bank  possible  in  small  com- 
munities where  it  was  considered  impossible  before.  Nothing 
that  Congress  has  ever  done  for  this  system  has  been  received 
with  such  acclaim. 

Up  to  the  close  of  March,  1910,  the  number  of  $25,000 
banks  organized  under  this  act  was  2470,  representing  a  paid 
up  capital  of  $61,750,000.  These  small  banks  have  found  the 
greatest  favor  in  the  Western,  Middle  Western  and  Pacific 
States. 

California  reports  72  of  these  $25,000  banks  out  of  the 
176  reporting  at  the  close  of  March.  These  72  banks  have  a 
paid  up  capital  of  $1,800,000  and  are  accommodating  many- 
small  communities  that  really  needed  such  facilities. 

Conversion  of  State  to  National. 

At  least  50  of  these  banks  have  been  conversions  from 
the  State  bank  system.  Some  of  these  converts  have  not 
always  remained  steadfast  to  their  new-found  faith,  but  have 
backslided  into  the  former  condition. 

Some  of  the  primary  organizations  under  the  national 
system  have  not  always  realized  just  what  they  wanted  and 
these  also  have  lowered  the  national  for  the  State  flag. 

Though  modified  in  many  particulars  since  their  incep- 
tion, national  banks  do  not  entirely  cover  all  the  varied 
phases  of  banking.  It  is  no  doubt  due  to  this  fact  that  some 
of  the  primary  organizations  have  gone  under  the  State  sys- 
tem in  order  to  appeal  to  a  wider  range  of  business.  It  is 
probably  for  the  same  reason  that  some  of  the  converted 
State  banks  have  surrendered  the  charters  for  State  charters. 

These  conditions  are  not  peculiar  to  this  State.  They 
have  been  observable  in  all  the  other  States,  though  more 
prominent  in  some  than  in  others. 

It  is  noticed,  however,  that  these  changes  have  been  more 
frequent  and  numerous  in  the  smaller-sized  communities, 
where  the  lines  of  banking  business  are  often  as  variable 


100  Banking  in  California 

as  in  the  larger  communities,  but  where  the  facilities  for  doing 
business  are  not  as  varied. 

Congress  has  made  many  concessions  in  the  interest  of 
the  national  banks  and  there  is  no  doubt  that  still  others  will 
be  made  if  it  can  be  shown  that  the  changes  desired  will  not 
impair  their  efficiency. 

It  is  claimed  by  some  that  the  supervision  of  national 
banks  has  been  of  a  higher  grade  than  that  of  some  of  the 
State  banks.  Of  course  State  banks  officials  will  not  admit 
this  claim  to  be  well  founded,  nor  is  there  any  good  reason 
why  they  should. 

There  have  been  instances  under  both  State  and  national 
bank  examiners  where  the  work  performed  seemed  to  be  of  a 
superficial  and  perfunctory  character.  Even  admitting  this 
to  have  been  the  case  in  more  instances  than  can  be  verified, 
these  outside  bank  examiners  do  create  a  wholesome  fear  that 
serves  in  a  measure  to  restrain  unwise  business  methods. 


Banking  in  California 


101 


Statement  of  All  Banks  in  California. 

(OOO's  omitted) 


JAN.  1 

NO. 

CAPITAL 

INVEST- 

INDIVIDUAL 

ALL  KINDS 

TOTAL 

YEARS 

BANKS 

SURPLUS 

MENTS 

DEPOSITS 

LOANS 

RESOURCES 

1872 

71 

$  41,593 

$  6,098 

$  72,064 

$  72,257 

$114,717 

1873 

78 

44,811 

7,509 

81,415 

84,  743 

144, 868 

1874 

84 

46, 783 

8,525 

88, 666 

90, 150 

151,791 

1875 

86 

47, 494 

8,701 

98, 620 

94,  678 

156,  293 

1876 

100 

54, 520 

10,589 

122,007 

135,068 

194, 108 

1877 

101 

60, 162 

14,217 

132, 160 

152,605 

200,609 

1878 

93 

50,957 

8,260 

103,113 

111,372 

161,419 

1879 

92 

50, 698 

8,914 

80, 133 

89,  380 

136, 225 

1880 

86 

39,  825 

10, 759 

82, 148 

75, 076 

128, 296 

1881 

87 

38, 419 

19, 844 

84, 998 

78, 130 

131,087 

1882 

87 

39, 374 

20, 798 

92, 557 

81,474 

140, 882 

1883 

93 

"42, 060 

24, 406 

100, 471 

85, 504 

151,589 

1884 

103 

46,438 

22,950 

105, 397 

99, 559 

160, 735 

1885 

106 

48,493 

21,530 

102, 299 

105,021 

164, 076 

1886 

114 

51,016 

18, 327 

100, 564 

112,154 

166, 160 

1887 

125 

52, 434 

21,828 

125, 168 

121,496 

188,  316 

1888 

184 

66,619 

27, 299 

155, 335 

154, 815 

235,  919 

1889 

207 

73, 733 

24,113 

158, 341 

163,867 

243,  721 

1890 

224 

79, 818 

23, 690 

165, 445 

180, 674 

257, 925 

1891 

244 

84, 560 

24, 198 

182, 630 

198,  385 

279, 467 

1892 

255 

87, 805 

25, 721 

196, 599 

213, 906 

298, 133 

1893 

278 

91,216 

26, 551 

212, 173 

232, 193 

319,052 

1894 

277 

90, 366 

20, 325 

190, 965 

211,413 

294, 565 

1895 

278 

87, 280 

24,  659 

195, 549 

207, 882 

300, 710 

1896 

284 

87,574 

34,588 

202,099 

205,  380 

307, 558 

1897 

280 

77, 680 

38,505 

198, 738 

191,702 

294,248 

1898 

286 

74, 600 

48, 775 

220, 055 

189,019 

316, 047 

1899 

284 

78, 952 

57, 560 

242, 553 

194, 575 

341,612 

1900 

280 

75, 212 

77, 897 

275, 077 

199,715 

378,013 

1901 

292 

78, 264 

86, 412 

295, 355 

212,  493 

401,  970 

1902 

303 

82, 143 

96, 454 

335, 378 

236, 676 

452, 231 

1903 

330 

96,348 

117,438 

396, 477 

285, 547 

538, 043 

1904 

380 

112,664 

132,249 

421,899 

319, 649 

588, 749 

1905 

448 

123,  315 

130,351 

451,969 

351, 145 

634,202 

1906 

530 

131,517 

141,249 

540, 301 

427,208 

758, 819 

1907 

618 

145, 598 

167, 001 

644, 505 

508, 135 

908,  867 

1908 

632 

157, 568 

162,511 

550, 460 

476, 381 

825,  564 

1909 

650 

162,212 

160, 871 

544, 389 

452, 610 

820, 962 

1909 

643 

162,243 

162, 364 

565, 270 

467, 623 

845, 236 

1910 

653 

175,405 

178,808 

611,677 

542, 383 

947,  724 

1910 

676 

185, 164 

180,  226 

651, 087 

562,400 

969, 936 

Last  three  statements  are  for  April  28,  1909,  and  March 
29  and  June  30,  1910. 


102  Banking  in  California 

This  is  probably  the  first  time  that  such  an  extended  and 
elaborate  compilation  of  the  banking  business  of  California 
has  ever  been  made.  It  would  have  been  carried  still  further 
back  if  it  had  been  possible  to  obtain  anything  like  reliable 
and  uniform  data  for  the  purpose;  that  was  found  to  be  en- 
tirely beyond  the  ken  of  the  living. 

Incorporated  banks  were  unknown  in  the  early  years  of 
pioneer  history  in  this  State.  Private  banking  was  then  the 
rule,  and  as  that  served  the  purpose  of  the  primary  period, 
there  was  little  desire  to  assume  the  responsibilities  inherent 
to  a  corporate  character. 

Of  course  during  those  early  years  there  was  no  official 
supervision  of  the  banking  business  and  very  little  publicity 
made  of  the  banks  as  a  group  or  as  individual  banks. 

One  of  the  savings  banks  of  San  Francisco  has  always 
claimed  to  have  been  the  first  incorporated  bank  of  that 
character  in  the  State  and  that  was  in  1857.  As  this  claim 
is  not  known  to  have  ever  been  disputed,  there  is  no  use  in 
questioning  it  now. 

The  Pacific  Bank  of  San  Francisco  made  bold  to  fre- 
quently advertise  itself  as  the  first  chartered  commercial  bank 
in  the  State,  and  the  claim  is  supposed  to  be  true.  That  was 
in  1863.  As  the  president  of  that  bank  was  the  first  Governor 
of  California  after  the  organization  of  the  State,  he  is  pre- 
sumed to  have  known  the  exact  fact  in  the  matter,  and  the 
claim  must  be  admitted. 

There  were  quite  a  number  of  banks  incorporated  in  the 
sixties,  some  of  which  are  still  in  operation.  The  first  savings 
banks  to  be  incorporated  outside  of  San  Francisco  took  place 
in  1867,  and  these  are  still  in  existence,  and  they  serve  to 
furnish  the  best  evidence  of  the  stability  of  that  system  when 
properly  administered. 

In  the  preparation  of  the  foregoing  tabulated  statement, 
the  writer  has  not  cared  to  consider  any  available  statistics 
prior  to  the  seventies,  because  of  their  incompleteness  as  to 


Banking  in  California  103 

details  and  for  the  want  of  definite  knowledge  as  to  the  accu- 
racy of  those  known  to  exist. 

As  to  the  national  banks,  the  statistics  go  back  to  the 
establishment  of  that  system  in  the  State  in  1871. 

With  reference  to  the  incorporated  savings  the  informa- 
tion goes  back  to  the  opening  of  the  first  bank  of  that  char- 
acter in  1857. 

Since  1875  all  classes  of  banks  have  been  covered  except 
the  private  banks,  and  there  have  also  been  included  in  the 
totals  since  the  first  ofiicial  reports  were  made  public  in  1887. 
As  far  as  possible  the  statements  are  for  the  1st  of  January 
in  each  year  or  the  nearest  to  that  date. 

Suspensions  and  Liquidations. 

Incidentally  and  necessarily  some  mention  has  been  made 
in  this  story  thus  far  about  the  banks  and  bankers  that  have 
fallen  out  by  the  wayside.  But  the  one-half  of  that  story  has 
never  been  told,  and  never  can  be,  for  those  who  could  best 
tell  it  are  no  longer  here. 

Passing  by,  for  the  present  at  least,  sporadic  cases  of 
failure,  it  will  be  well  to  consider  some  of  the  more  important 
and  far-reaching  cases  and  of  the  causes  leading  up  to  the 
same. 

In  the  early  years  the  most  notable  of  these  were  the 
embarrassments  of  the  express  companies  in  San  Francisco 
which  had  been  doing  considerable  banking  business. 

This  trouble  occurred  in  the  spring  of  1855  and  was  pre- 
cipitated by  the  failure  of  Page,  Bacon  &  Co.  in  February  of 
that  year.  This  was  the  most  exciting  event  of  that  character 
in  the  history  of  the  city  up  to  that  time. 

Page,  Bacon  &  Co.  was  the  name  of  a  St.  Louis  firm.  This 
firm  had  contracted  to  build  a  railroad  between  St.  Louis  and 
Cincinnati,  relying  upon  financial  aid  from  New  York  to  carry 
out  the  scheme.  This  having  failed  at  a  critical  juncture,  a 
member  of  the  St.  Louis  firm  who  was  interested  in  the  busi- 
ness of  Page,  Bacon  &  Co.  of  San  Francisco,  appealed  for 
money  to  tide  over  the  difficulty. 


104  Banking  in  California 

Not  realizing  the  seriousness  of  the  trouble,  the  sum  of 
$500,000  in  gold  was  forwarded  in  good  faith.  The  steamer 
due  to  arrive  before  this  gold  was  placed  aboard  the  outgoing 
steamer,  failed  to  come  in  on  schedule  time. 

But  soon  after  the  steamer  carrying  the  gold  coin  had 
passed  out,  the  delayed  steamer  with  a  special  agent  bearing 
unpleasant  news  came  into  the  harbor. 

The  agent  was  dropped  into  a  small  boat  that  came  along- 
side and  hastily  carried  to  the  shore.  This  was  on  Saturday 
afternoon,  after  bank  hours. 

He  immediately  sought  the  manager  of  Page,  Bacon  & 
Co.  and  communicated  to  him  the  news  of  the  failure  of  Page, 
Bacon  &  Co.  of  St.  Louis 

Then  came  the  run  on  the  office  here,  with  all  its  attend- 
ant and  disagreeable  results,  which  included  the  suspension 
of  two  other  big  express  and  banking  companies  and  almost 
endless  litigation,  as  well  as  temporary  suspensions  of  every 
private  bank  in  the  city. 

Bank  Failure  Prevented  by  a  Bluff. 

A  good  story  is  told  of  one  of  the  popular  private  bankers 
of  San  Francisco  during  these  troublous  times.  He  was  a 
pioneer  among  the  pioneer  bankers,  having  established  himself 
under  the  name  of  Burgoyne  &  Co.  in  June,  1849. 

In  those  days  gamblers  were  even  more  numerous  than 
bankers,  and  they  blazoned  their  business  much  more  openly. 
Gambling  was  the  chief  business  as  well  as  the  chief  amuse- 
ment of  a  considerable  proportion  of  the  motley  crowd  that 
had  gathered  at  the  embryo  metropolis  of  the  Pacific  Coast. 

It  is  said  that  Mr.  Burgoyne  was  a  favorite  with  many 
of  these  men  who  were  engaged  in  another  form  of  taking 
and  giving  out  money. 

There  was  a  run  upon  the  bank  of  Burgoyne  &  Co.  as 
there  was  upon  other  private  bankers.  There  was  a  sufficient 
number  of  idle  people  in  the  city  to  supply  a  good-sized  crowd 
to  look  after  every  person  who  was  compassed  with  a  sea 
of  trouble. 


Banking  in  California  105 

It  was  a  very  big  crowd  that  filled  the  small  quarters 
occupied  by  Burgoyne  &  Co.  Some  of  these  wanted  the  money 
due  them  and  they  wanted  it  bad,  and  the  whole  amount,  and 
they  wanted  it  right  away. 

There  were  probably  others  in  the  crowd  who  did  not 
have  a  dollar  in  the  embarrassed  bank,  but  they  were  just 
there  out  of  sympathy,  you  know,  for  the  other  fellow,  and 
who  were  insistent  that  he,  at  least,  should  have  a  square  deal. 
There  never  was  a  run  on  a  bank  that  did  not  attract  some  of 
those  disinterested  and  disgruntled  persons,  who  belong  to  a 
class  altogether  too  large  that  are  delighted  when  trouble 
comes,  provided  they  are  not  personally  involved. 

Well,  Burgoyne  &  Co.  had  the  trouble,  all  right.  They 
also  had  more  friends  on  the  outside  than  on  the  inside  of  their 
little  enclosure. 

They  were  neighbors,  too,  and  near-by.  Word  was  sent 
to  some  of  them,  and  soon  one  of  them  forced  his  way  to  the 
counter  and  threw  down  a  bag  of  gold  coins  to  be  deposited. 
It  was  like  oil  on  troubled  waters.  It  had  a  restraining  effect 
on  the  turbulent  crowd. 

Soon  another  man  came  in  with  a  bag  of  gold  which  he 
wanted  to  deposit.  A  little  later  a  third  followed.  The  crowd 
thinned  out,  and  the  run  had  collapsed. 

One  bag  of  gold  did  the  business,  for  as  soon  as  received 
it  was  passed  to  a  confederate  at  the  back  door  and  then 
brought  in  at  the  front  door  to  be  again  deposited. 

Big  Failure  and  Heroic  Recovery. 

Bank  troubles  of  a  still  more  serious  character  in  volume 
and  duration  were  inaugurated  in  August,  1875,  when,  to  the 
great  surprise  of  the  community  as  well  as  to  the  country  at 
large,  it  was  announced  that  the  doors  of  the  Bank  of  Cali- 
fornia had  been  closed  about  an  hour  earlier  than  usual. 

The  prominence  of  this  institution,  with  a  capital  larger 
than  that  of  any  other  bank  on  the  coast,  and  with  a  numerous 
clientele  of  depositors  and  borrowers,  gave  a  thrill  to  the 


1^^  Banking  in  California 

announcement  of  its  suspension,  the  like  of  which  had  never 
been  experienced  before  in  this  city. 

An  immense  crowd  was  soon  gathered  about  the  building. 
The  managers  of  the  National  Gold  Bank  and  Trust  Com- 
pany on  the  opposite  side  of  the  street,  upon  receiving  a  hint 
of  the  impending  trouble,  tendered  a  good  lot  of  coin  to  tide 
the  bank  over  its  trouble.  But  the  offer  was  politely  declined 
on  the  ground  of  its  inefficiency  to  meet  the  threatened  dis- 
aster. 

After  the  doors  had  been  closed,  a  meeting  of  intense 
interest  was  held  in  the  directors'  room.  One  of  the  founders 
of  the  bank,  and  its  first  president,  was  a  prominent  figure 
in  that  gathering,  and  no  doubt  led  the  heroic  action  for 
immediate  rehabilitation  then  and  there  taken. 

When  the  gentleman  at  that  time  serving  as  president 
was  asked  if  the  bank  would  reopen,  he  is  reported  to  have 
replied,  ''Never."  But  a  little  man  inside,  with  more  force 
than  elegance,  declared  that  it  would  reopen,  no  matter  what 
the  personal  financial  sacrifice. 

Though  the  failure  of  this  bank  involved  a  much  larger 
loss  than  was  at  first  thought  possible,  its  early  rehabilitation 
was  the  occasion  of  unusual  and  heartfelt  rejoicing,  amid 
the  booming  of  cannon  and  the  fluttering  of  flags. 

The  stockholders  of  the  bank  who  promtly  responded  to 
repair  the  heavy  losses  which  made  rehabilitation  possible, 
received  the  commendations  of  the  State,  and  they  well 
deserved  the  tribute.  It  placed  the  bank  in  a  stronger  posi- 
tion than  ever.  The  popularity  and  prosperity  which  it  has 
since  enjoyed  are  no  doubt  the  result  of  the  heroic  action 
taken  when  trouble  had  about  reached  the  limit  of  human 
endurance. 

It  required  four  assessments  of  $1,000,000  each  to  place 
the  bank  again  upon  a  sound  basis,  but  the  $4,000,000  of  new 
money  was  furnished  without  a  murmur.  The  amount  actu- 
ally contributed  was  much  larger  than  that,  but  the  additional 
sum  was  in  the  form  of  a  reduction  of  capital. 


Banking  in  California  107 

Other  Failures  and  Causes  of  Same. 

Other  failures  immediately  followed  the  suspension  of 
the  big  bank.  Perhaps  the  most  notable  of  these  were  those 
of  the  Merchants'  Exchange  Bank,  otherwise  known  as  the 
bank  of  Alvinza  Hayward,  its  founder  and  promoter,  and  the 
National  Gold  Bank  and  Trust  Company.  The  history  of 
the  last  named  has  been  previously  covered. 

Depositors  did  not  lose  a  dollar  by  either  of  these  sus- 
pensions. There  were  some  other  bank  failures  in  the  city 
and  country  about  the  same  time,  but  they  were  of  a  minor 
character  and  made  little  impression. 

The  causes  contributing  to  these  failures  were  general 
business  depression,  the  agitations  of  the  unemployed  and  the 
falling  off  in  the  bullion  product  of  the  Comstock  lode.  Either 
one  of  these  was  a  menace  to  the  banking  business,  while  the 
combination  accentuated  the  situation. 

There  .had  been  considerable  excitement  in  mining  stocks 
incident  to  the  large  bullion  yield  of  the  California  and  Con- 
solidated Virginia  mines.  The  deposits  in  these  mines  showed 
signs  of  exhaustion  and  the  values  of  these  and  other  stocks 
had  begun  to  waver  and  drop.  Assessments  were  more  fre- 
quent and  more  difficult  to  meet  because  of  lessened  resources 
through  a  partial  failure  in  dividends. 

In  previous  years  there  had  been  spurts  in  mining  stocks 
because  of  rich  ore  discoveries,  followed  in  each  instance  by  a 
season  of  depression  and  losses.  But  this  last  one  was  the 
worst  of  all,  on  account  of  the  greater  magnitude  and  longer 
duration  of  the  deal. 

There  never  has  been  a  duplication  of  that  excitement  in 
the  Comstock  mines  though  thirty-five  years  have  since 
elapsed,  and  from  present  appearances  there  will  never  be 
another. 

Previous  to  the  discovery  of  the  ore  bodies  in  the  Califor- 
nia and  Con  Virginia  mines,  the  Bank  of  California  had  been 
prominently  associated  in  the  development  of  the  Comstock 
mines.     It  was  not  interested,  however,  in  this  last  and  big- 


108  Baulking  in  California 

gest  bonanza,  which  had  been  discovered  and  operated  by  a 
quartette  of  gentlemen  who,  in  the  summer  of  1875,  were 
forming  a  big  bank  as  a  rival  to  the  Bank  of  California,  and 
which  opened  for  business  simultaneously  with  the  reopening 
of  the  Bank  of  California  on  October  2,  1875. 

Savings  Banks  Go  Down. 

The  bank  troubles  which  started  in  August,  1875,  left 
baleful  influences  in  operation  for  the  next  four  years.  Per- 
haps one  reason  for  the  continuance  of  these  difficulties  was  the 
introduction  of  an  entirely  new  element  in  the  nature  of  offi- 
cial bank  examinations  through  an  act  of  the  Legislature 
creating  a  Board  of  Bank  Commissioners. 

These  commissioners  were  appointed  in  the  spring  of 
1878,  and  made  their  first  examination  in  the  fall.  Up  to 
that  time  there  had  been  no  official  oversight  of  the  banks. 

Had  the  banks  been  in  good  condition,  a  visit  from  the 
Commissioners  would  have  caused  no  uneasiness  and  certainly 
no  alarm.  But  some  of  them  were  not  prepared  for  a  visit 
of  that  sort,  despite  the  warnings  which  the  suspended  banks 
in  the  previous  two  years  had  given. 

The  Masonic  Savings  and  Loan  Bank  was  the  first  to  be 
visited  by  the  Commissioners.  They  soon  discovered  evidences 
of  weakness  which  impaired  the  capital,  and  demanded  that  it 
be  made  good  by  the  addition  of  new  money.  The  demand 
was  not  heeded,  and  the  Commissioners,  acting  under  author- 
ity, closed  the  bank.    It  never  reopened  for  business. 

The  second  bank  examined  came  through  all  right,  but 
the  third  bank  experienced  the  same  fate  as  the  first.  This 
was  the  Farmers '  and  Merchants '  Bank  of  Savings.  This  bank 
owed  its  depositors  only  $373,675,  while  the  Masonic  Bank 
owed  its  depositors  $1,150,900. 

The  fourth  bank  visited  was  the  French  Savings  and 
Loan  Society,  which  had  been  in  existence  since  1862.  It 
was  found  to  be  in  a  bad  condition,  and  owed  its  depositors 
$5,503,100.  The  doors  were  at  once  closed,  never  to  be 
reopened. 


Banking  in  California  109 

The  Odd  Fellows '  Savings  Bank  was  the  next  one  to  fail 
to  pass  a  satisfactory  examination.  The  bank  suffered  a  severe 
run  in  the  fall  of  1878,  and  to  tide  over  its  troubles  it  was 
reorganized  as  a  joint  stock  bank.  This  relief  proved  to  be 
only  temporary,  and  on  February  5,  1879,  it  was  voted  to  go 
into  liquidation.  Its  indebtedness  to  depositors  at  that  time 
was  $2,117,100. 

As  is  well  known,  all  these  banks  were  San  Francisco 
organizations,  which  might  have  been  in  business  today  if 
they  had  been  properly  managed,  but  the  instinct  to  make  big 
returns  for  depositors  proved  too  tempting. 

Trouble  Spreads — Liquidation. 

Some  half  dozen  of  the  interior  savings  banks,  fearing  the 
day  of  wrath  would  soon  overtake  them,  sought  surcease  by 
voluntarily  retiring  from  business. 

Two  of  these  were  the  Capital  Savings  Bank  and  the  Odd 
Fellows  Savings  and  Commercial  Bank  of  Sacramento.  A 
new  bank  was  immediately  formed  to  take  over  the  assets  of 
the  former,  and  this  bank  is  still  in  successful  operation. 

The  San  Jose  Savings  Bank  of  San  Jose,  the  Napa  Valley 
Savings  and  Loan  Society  of  Napa  and  the  Maryville  Savings 
Bank  also  went  into  voluntary  liquidation. 

All  these  banks  would  probably  have  been  able  to  pass 
a  satisfactory  examination,  but  the  suspension  of  the  four 
banks  in  San  Francisco  had  brought  discredit  upon  all  banks 
of  this  character,  and  considerable  sums  of  money  had  been 
withdrawn  from  several  of  these  banks  in  all  parts  of  the 
State. 

It  was  this  loss  of  confidence  that  no  doubt  led  to  the 
above  action  on  the  part  of  the  banks  named,  and  one  or  more 
others,  the  names  of  which  are  not  remembered. 

The  Masonic  Bank  paid  its  depositors  90  per  cent  up  to 
1889,  and  then  expected  to  pay  5  per  cent  more. 

The  Farmers'  and  Mechanics'  Bank  paid  70  per  cent,  the 
depositors  losing  30  per  cent,  or  $112,112.     The  stockholders 


^^^  Banking  in  California 

paid  $60,000  for  their  experience  in  banking,  and  probably 
thought  that  the  money  was  well  expended. 

The  assets  of  the  French  Savings  and  Loan  Society  were 
taken  over  by  a  new  organization  and  realized  a  dividend  of 
70  per  cent  for  the  depositors. 

The  Odd  Fellows'  Savings  Bank  paid  871/2  per  cent  up 
to  August,  1900.  At  that  time  it  still  owed  depositors  the 
sum  of  $264,640  and  its  stockholders  $128,975,  which  sum  was 
put  up  to  save  the  bank,  but  it  came  too  late  to  be  of  service. 
On  August  15,  1900,  the  bank  had  $49,444  in  money  and 
real  estate  taken  for  debt  valued  at  $35,884. 

The  Marysville  Bank  was  a  mutual  organization  and 
very  prosperous  from  the  start  imtil  the  bank  troubles  of 
1878.  It  paid  off  every  depositor  dollar  for  dollar,  besides 
giving  them  their  pro  rata  of  the  reserve  fund  which  had  been 
created  after  meeting  expenses  and  dividends. 

Country-wide  Bank  Panic  of  1893. 

The  next  general  trouble  among  the  banks  in  this  State 
was  one  purely  of  sympathy,  incident  to- the  bank  panic  of 
1893,  which  had  its  start  in  Chicago  in  the  spring  of  that 
year,  and  which  reached  San  Francisco  about  the  end  of  June. 

The  failure  of  the  Bank  of  Santa  Clara  County  at  Santa 
Clara  in  May,  1893,  was  the  first  recorded  for  that  year.  That 
failure  was  in  no  wise  connected  with  the  outbreak  of  trouble 
in  Chicago,  its  embarrassment  being  the  fruit  of  local  causes. 
The  assets  were  taken  over  by  a  new  bank  under  the  name  of 
the  Santa  Clara  Valley  Bank,  which  is  still  doing  business. 

At  least  seven  State  banks  were  dropped  in  1893,  includ- 
ing two  in  San  Francisco  and  five  in  the  southern  part  of  the 
State.  The  two  in  San  Francisco  were  closely  allied,  one  being 
the  Pacific  Bank  and  the  other  the  People's  Home  Savings 
Bank,  the  latter  being  used  as  a  feeder  to  the  former. 

Neither  of  these  banks,  at  least  in  the  latter  part  of  their 
existence,  had  the  entire  confidence  of  the  community,  so  their 
suspension  was  not  a  complete  surprise.  The  former  has  paid 
its  depositors  60  per  cent  and  the  latter  46  per  cent. 


Banking  in  California  m 

The  bank  panic  of  1893  was  the  most  unique  in  at  least 
one  respect  that  ever  occurred  in  this  country,  and  that  was 
in  the  very  large  proportion  of  the  suspended  banks  having 
assets  in  excess  of  liabilities.  This  was  certainly  something 
quite  remarkable. 

Under  normal  conditions  it  would  seem  utterly  ridiculous 
for  a  bank  having  assets  in  excess  of  liabilities  to  suspend. 
Conditions  in  1893  were  not  normal,  and  yet  they  were  just 
what  had  been  predicted  by  men  of  sound  business  sense. 

It  was  as  plain  as  daylight  that  the  Government's  course 
in  the  compulsory  coinage  of  silver  would  inevitably  lead  to 
financial  trouble.  The  whole  proceeding  from  its  inaugura- 
tion in  1878  had  been  entirely  out  of  the  ordinary,  purely  arti- 
ficial and  farcical  to  the  last  degree. 

Talk  about  inflation  of  the  currency !  There  was  nothing 
like  it  before,  there  has  been  nothing  like  it  since,  and  it  is  to 
be  hoped  there  will  be  nothing  like  it  in  the  future. 

Congress  did  a  very  sensible  thing  in  calling  a  halt  upon 
these  purchases  of  silver  for  that  purpose  in  November,  1893, 
which,  however,  but  poorly  atones  for  the  mistake  it  made  in 
1878. 

Extent  of  1893  Failures— Panic  of  1907. 

In  a  very  elaborate  summary  of  these  suspensions  in 
1893,  as  printed  in  Bradstreet  's  of  February  17,  1894,  the  rec- 
ord shows  a  total  of  598  bank  suspensions  in  the  United  States 
in  that  year,  of  which  193  had  resumed  up  to  that  time.  It  is 
probable  that  most  of  the  other  405  resumed  afterwards. 

The  suspended  banks  reported  their  aggregate  assets  at 
$184,281,000  and  their  liabilities  at  $170,295,700. 

These  banks  included  154  nationals.  Of  the  State  banks 
184  were  commercial,  50  savings,  196  private  and  14  loan  and 
trust. 

The  national  banks  made  the  best  show  of  assets  to  liabil- 
ities, the  difference  showing  a  margin  of  $16,000,000.  The 
savings  banks  had  dollar  for  dollar  and  the  incorporated  and 
private  commercials  also  a  fair  margin  to  the  good.    The  lia- 


112  Banking  in  California 

bilities  of  the  loan  and  trust  companies,  however,  were  50  per 
cent  in  excess  of  assets. 

The  net  gain  effected  in  the  number  of  national  banks 
in  the  United  States  in  1893  was  just  three,  the  smallest  net 
gain  since  1878,  when  by  a  singular  coincidence  there  was  a 
net  loss  of  three. 

For  the  five  years  following  1893  the  bank  suspensions 
in  the  United  States  varied  from  51  to  197,  the  largest  number 
being  in  1896  and  the  smallest  in  1898. 

Of  the  51  in  the  last  named  year  only  4  were  nationals, 
while  28  were  private  banks. 

In  referring  to  the  failure  of  the  Union  Savings  Bank  at 
San  Jose  in  January,  1899,  it  was  remarked  that  it  was  the 
first  of  the  kind  in  three  years.  In  1901  only  one  bank  failure 
was  reported,  the  Citizens'  Bank  of  Sonora. 

It  is  doubtful  if  the  same  number  of  banks  in  any  other 
State  could  show  so  few  failures  for  similar  periods. 

The  latest  general  troubles  among  the  banks  occurred  in 
the  fall  of  1907,  and  one  contributing  cause  was  supposed  to  be 
the  attempt  to  corner  the  copper  product  of  the  country  with 
the  view  of  enhancing  the  value.  While  that  attempt  resulted 
in  a  dismal  failure,  it  resulted  in  several  failures  among  the 
banks  and  a  money  scarcity  that  had  not  been  known  for 
many  years. 

As  a  matter  of  fact,  there  was  more  money  in  the  country 
at  the  close  of  1907  than  at  any  previous  time  in  its  history. 
At  the  same  time  it  appeared  to  be  quite  possible  that  the 
amount  in  actual  circulation  was  less  than  it  had  been  for 
years.  Impaired  confidence  from  overspeculation  had  put 
much  good  money  out  of  commission. 

Twenty  Bank  Failures  in  1908. 

California  had  an  unusual  experience  as  the  result  of  the 
tight  money  market  throughout  the  country.  The  best  and 
strongest  banks  were  as  unable  to  pay  out  good  money  as  the 
smallest  and  weakest. 


The  First  National  Bank,  San  Francisco.  1870. 
First  Federal  Trust  Company.   1907 


:i 


Banking  in  California  113 

For  the  twelve  months  ending  October  1,  1908,  the  Bank 
Commissioners  were  obliged  to  close  sixteen  banks,  exclusive 
of  the  four  branch  banks  of  one  of  the  sixteen,  thus  really 
putting  their  seal  of  disapproval  on  the  doors  of  twenty  banks. 

One  of  these  and  the  most  important  of  all  in  the  matter 
of  resources  was  the  California  Safe  Deposit  and  Trust  Com- 
pany with  its  four  branches  in  different  parts  of  the  city. 
This  bank  had  not  returned  a  dollar  to  depositors  up  to  May, 
1910,  though  always  during  the  interval  in  the  hands  of  a 
receiver.  The  bank  was  incorporated  in  1882,  and  at  the 
time  of  suspension  had  a  capital  of  $2,625,000  with  resources 
of  $12,606,600  and  was  owing  its  depositors  $9,072,741.  First 
dividend  of  10  per  cent  June  1,  1910. 

Four  other  San  Francisco  banks  were  in  the  list,  all  small 
concerns,  the  removal  of  which  entailed  no  serious  loss. 

All  the  other  suspended  banks  in  that  year  were  outside 
of  San  Francisco,  including  three  in  Los  Angeles,  one  at  Long 
Beach,  one  at  Ventura,  one  at  Fresno  and  one  respectively  at 
Oakland,  San  Mateo,  Calistoga  and  Sutter  Creek. 

In  their  inability  to  secure  money  to  transact  business, 
the  banks  in  all  the  larger  cities  of  the  country  had  to  resort 
to  the  use  of  clearing-house  certificates  for  many  weeks  after 
the  first  outbreak  of  the  trouble  in  the  fall  of  1907. 

These  certificates  were  issued  against  selected  collateral 
deposited  under  the  auspices  of  the  clearing  house.  The  cer- 
tificates were  readily  received  in  lieu  of  money  and  after  they 
had  served  their  purpose  they  were  promptly  retired. 

It  is  hoped  that  before  another  occasion  of  such  money 
stringency  occurs  there  may  be  provided  a  still  better  way 
of  issuing  emergency  currency  to  keep  things  moving  until 
there  is  a  restoration  of  business  confidence. 

Features  of  California  Savings  Banks 

The  savings  bank  business  in  California  has  been  charac- 
terized by  some  features  which,  while  they  may  not  be  alto- 
gether unique,  deserve  special  mention. 

One  of  these  is  their  joint  stock  character  as  distinguished 


114  Banking  in  California 

from  the  mutual  system  so  common  in  other  parts  of  the  coun- 
try, especially  in  New  York  and  the  New  England  States.  So 
far  as  remembered,  only  five  banks  have  been  organized  in 
this  State  under  the  mutual  system,  four  of  which  retired  years 
ago. 

Another  feature  is  the  high  average  character  of  the 
deposit  accounts.  At  the  end  of  the  first  decade  of  the  exist- 
ence of  these  banks  the  deposits  in  the  city  banks  showed  an 
average  of  $716  and  in  the  interior  $516.  Five  years  later  it 
was  $939  in  the  city,  $472  in  the  interior  and  $814  for  the 
whole  State.  On  the  1st  January,  1908,  the  182,668  deposit 
accounts  in  the  twelve  savings  banks  in  San  Francisco  showed 
an  average  of  $805. 

For  many  years  after  their  organization  nearly  all  the 
joint  stock  savings  banks  in  the  State  recognized  two  classes 
of  deposit  accounts,  ordinary  and  term.  Under  the  normal 
conditions  the  former  were  always  payable  on  demand,  while 
the  latter  required  a  notice  of  six  months  for  withdrawal  and 
drew  about  one-fifth  of  one  per  cent  more  interest  than  ordi- 
nary deposits.  Within  a  year  the  last  of  the  city  banks  cut 
out  term  deposits  and  the  interior  banks  have  generally  fol- 
lowed the  example  in  this  elimination  process.  Term  certifi- 
cates of  deposit  have  been  substituted. 

The  joint  stock  feature  in  savings  banks  appears  to  have 
worked  well  in  this  State.  The  paid-up  capital  in  these  banks 
varies  from  $25,000  to  $1,500,000,  and  is  a  guarantee  to  the 
depositor  under  the  personal  liability  law  of  the  State.  The 
banks  are  also  required  to  create  and  maintain  a  reserve  fund. 
The  only  mutual  savings  bank  in  the  State  has  a  reserve  fund 
that  is  in  excess  of  the  combined  capital  and  reserve  fund  of 
any  other  savings  Bank  in  the  commonwealth. 

Loans  Outside  of  City. 

Thirty  years  ago  the  San  Francisco  savings  banks  had  23 
per  cent  of  all  their  mortgage  loans  on  property  outside  of 
the  city.     This  certainly  was  a  liberal  proportion,  but  that 


Banking  in  California  115 

was  in  the  days  of  big  grain  crops  in  the  State,  and  big  grain 
crops  at  that  time  meant  big  money  returns  to  the  cultivators 
of  the  soil. 

Thirteen  years  ago  these  mortgage  loans  were  much  more 
evenly  divided  between  San  Francisco  and  other  sections  on 
the  Coast,  though  relative  proportions  then  being  48  per  cent 
outside  against  52  per  cent  in  San  Francisco. 

On  July  1,  1892,  the  real  estate  loans  of  the  San  Francisco 
savings  banks  were  apportioned  as  follows: 

In  San  Francisco $40,064,365 

Interior  of  State 29,191,644 

Total  in  California $69,256,009 

Total  in   Oregon 4,318,738 

Total  in    Washington 3,237,812 

Total  in    Arizona 43,750 

Total  in  Utah 15,000 

Grand    total $76,901,309 

The  German  Savings  was  the  first  to  respond  to  the  de- 
mands of  borrowers  outside  of  California.  The  San  Francisco 
Savings  Union,  Savings  and  Loan  Society  and  Security  Sav- 
ings Bank  followed  the  example.  Within  the  last  three  years 
the  last  named  three  banks  have  greatly  reduced  their  loans 
outside  of  the  State,  if  they  have  not  eliminated  them  entirely, 
leaving  the  German  Savings  practically  alone  in  that  field  of 
operations. 

In  1892  the  State  was  divided  into  fifty-four  counties, 
and  the  $69,256,000  in  the  foregoing  exhibit  was  divided 
between  forty-four  counties.  In  three  of  the  outside  counties 
the  amounts  loaned  were  $3,743,500  in  Alameda,  $3,458,800 
in  Fresno  and  $3,334,700  in  Los  Angeles  county.  Tulare 
county  was  a  borrower  to  the  extent  of  $2,671,800  and  there 
was  upwards  of  one  million  loaned,  respectively,  in  San  Ber- 
nardino, San  Luis  Obispo,  Santa  Clara  and  Stanislaus 
counties. 

The  ten  counties  in  which  no  loans  by  these  banks  had 


116  Banking  in  California 

been  made  up  to  that  time  were  small  and  remote  counties  in 
the  mountain  districts,  for  the  most  part. 

The  German  Savings  was  the  first  to  enter  Utah,  placing 
its  first  loan  there  in  1892.  Since  then  it  has  been  loaning 
in  Nevada,  Idaho  and  the  Territory  of  Hawaii.  In  1908  it  had 
loans  in  thirty-eight  counties  in  the  State,  including  two  coun- 
ties not  in  the  list  in  1892. 

The  rapid  multiplication  of  savings  banks  in  the  interior 
of  the  State,  as  well  as  in  the  States  contiguous  to  California, 
has  made  competition  keen  and  the  business  outside  of  San 
Francisco  has  therefore  been  less  desirable,  resulting  in  a 
material  reduction  in  these  outside  loans. 

The  interior  savings  banks  have  never  cared  to  take 
revenge  on  San  Francisco  for  entering  their  fields.  Am  exam- 
ination of  the  location  of  the  loans  of  the  interior  savings 
banks  in  1908  reveals  less  than  $6,000  placed  in  San  Francisco 
and  this  amount  was  divided  between  three  of  these  banks. 
Since  then  other  comparatively  small  loans  have  been  placed 
in  San  Francisco  mortgages  by  country  banks. 

An  argument  for  specialized  banking  might  be  drawn 
from  a  comparison  between  the  commercial  and  savings  banks 
in  the  way  of  good  and  bad  loans. 

By  bad  loans  is  meant  such  loans  as  borrowers  were  unable 
to  pay,  and  where  the  banks  had  to  take  over  the  property  in 
lieu  of  the  money  loaned  together  with  unpaid  interest. 

The  illustration  here  given  was  drawn  at  random  and 
with  no  idea  that  it  is  an  exceptional  one  or  not. 

In  July,  1899,  the  savings  banks  of  California  were  car- 
rying $8,758,215  as  the  value  of  real  estate  exclusive  of  bank 
premises.  The  presumption  is  that  this  real  estate  was  taken 
for  debt  and  that  is  the  way  it  used  to  be  stated  in  the  reports 
of  the  Bank  Commissioners.  The  city  savings  banks  had 
$5,739,100  of  this  total  and  the  country  banks  had  $3,019,200. 

On  the  same  date  the  commercial  banks  were  carrying 
for  the  same  item  $8,776,592,  of  which  $2,373,445  belonged  to 
the  city  banks  and  the  remainder  to  the  country  banks. 


Banking  in  California  117 

In  July,  1908,  the  savings  banks  held  only  $2,071,332  in 
this  form  of  assets,  a  reduction  of  $6,686,883,  while  the  com- 
mercial banks  were  carrying  $3,635,935,  a  reduction  of 
$5,140,657. 

Bankers  that  have  the  smallest  amount  in  property  taken 
for  debt  consider  themselves  fortunate.  It  is  no  part  of  a 
bank's  business  to  acquire  property  in  that  way.  Some  of 
the  savings  banks  in  the  State,  once  heavily  loaded  with  that 
kind  of  property,  have  recently  practically  cut  it  all  out. 

Dividends  of  City  Savings  Banks. 

What  savings  banks  have  done  for  their  respective  com- 
munities will  probably  never  be  known.  The  managers  are 
not  likely  to  tell  it,  and  there  is  no  easily  accessible  official 
record  to  show  the  result. 

In  1878  the  writer  made  a  compilation  of  what  each  sav- 
ings bank  then  in  existence  in  San  Francisco  had  paid  in  the 
way  of  dividends  to  depositors  from  the  day  they  opened 
for  business  to  the  end  of  1877,  in  semi-annual  payments.  The 
totals  in  each  case  were  as  annexed : 

Name.  Amount. 

Savings  and  Loan  Society $  9,629,176 

Hibernia  Savings  and  Loan 11,890,806 

French  Mutual  and  Provident 5,581,481 

San  Francisco  Savings  Union 5,185,647 

Odd  Fellows '  Savings  Bank 3,451,417 

Farmers '  and  Mechanics '  Savings 291,681 

German  Savings  and  Loan 3,085,309 

Masonic  Savings  Bank 710,762 

Humboldt  Savings  and  Loan 418,071 

Security  Savings  Bank 609,812 

California  Savings  and  Loan 127,317 

Total $40,981,479 

The  tabulated  matter  from  which  these  totals  are  taken 
also  gave  the  rates  of  interest  for  each  semi-annual  term,  both 
on  ordinary  and  term  deposits  as  well  as  the  amounts  to  the 
credit  of  depositors  at  the  end  of  each  semi-annual  term. 

The  arrangement  of  the  above  dividends  is  in  the  order  of 


il8  Banking  in  California 

the  seniority  of  the  banks,  the  first  named  having  been  organ- 
ized in  1857  and  the  last  named  in  1873. 

Though  the  rates  of  interest  since  1878  have  been  much 
lower  than  those  previously  in  force,  the  longer  period  which 
has  since  elapsed  and  the  greatly  increased  amounts  bearing 
interest  must  have  added  considerably  to  the  above  total. 

Four  of  the  banks  in  the  list  paid  their  last  dividends  in 
1878,  having  suspended  at  the  close  of  that  year. 

The  Savings  and  Loan,  Hibernia  and  the  Savings  Union, 
organized  in  1857,  1859  and  1862  have  probably  paid  nearly 
as  much  more  since  1877  as  they  did  up  to  the  close  of  that 
year,  while  the  German,  Humboldt  and  Security  have  paid 
much  more,  because  of  the  longer  period  which  has  since 
elapsed  compared  with  that  covered  in  the  above  statement. 

The  California  Savings  and  Loan  Society  retired  from 
business  in  September,  1894. 

San  Francisco  Clearing  House  Association. 

One  of  the  propositions  relating  to  the  banking  business 
very  often  discussed  in  the  early  seventies  was  the  need  of  a 
better  system  for  cashing  checks.  Facilities  for  doing  this 
work  were  known  to  exist  and  had  been  in  operation  for  sev- 
eral years,  notably  in  New  York,  where  the  first  bankers' 
clearing  house  had  been  established  in  October,  1853. 

This  system  had  long  before  passed  the  experimental 
stage  and  had  been  fully  tried  and  proved.  The  efficiency 
and  economy  of  the  plan  had  been  demonstrated  beyond  the 
shadow  of  a  doubt. 

It  was  argued,  and  with  a  good  show  of  reason,  that  if 
Eastern  cities,  where  comparatively  nothing  but  paper  money 
was  handled,  found  this  a  good  and  necessary  way  of  settling 
the  balances  between  the  local  banks,  it  was  surely  a  desirable 
plan  to  adopt  in  California,  where  coin  was  almost  exclusively 
the  medium  of  such  settlements. 

Of  course,  all  this  was  readily  and  universally  conceded, 
but  it  was  argued  that  the  interests  here  were  too  varied  and 


Banking  in  California  119 

too  conflicting  to  expect  any  harmonious  action  on  a  proposi- 
tion of  this  sort. 

It  is  true  there  was  some  force  to  this  reasoning.  The 
bankers  of  San  Francisco,  as  well  as  the  business  men  of  San 
Francisco,  lacked  a  good  deal  in  that  unity  of  feeling  and  pur- 
pose so  desirable  in  promoting  enterprises  and  plans  even 
when  generally  conceded  to  be  for  the  public  good. 

At  that  time  considerable  banking  business  was  still  in 
the  hands  of  private  bankers.  The  incorporated  part  of  the 
business  was  divided  between  State,  foreign  and  national  sys- 
tems and  each  was  trying  to  get  the  best  of  the  other  instead 
of  working  together  for  a  common  end. 

It  was  feared  that  if  the  checks  of  all  these  banks  were 
turned  into  one  common  center  each  bank  would  get  some  idea 
of  what  the  other  was  doing  and  the  names  of  their  clients, 
and  so  be  in  a  condition  to  divert  business  one  from  the  other. 
In  some  of  the  banks  this  feeling  of  jealousy  was  very  intense, 
and  time  and  education  alone  could  overcome  it. 

Original  Members. 

Serious  trouble  will  sometimes  bring  a  community  of 
interests  together  when  every  other  device  has  failed.  This 
was  the  case  with  the  establishment  of  this  proposed  agency. 
The  general  bank  difficulties  of  the  fall  of  1875  brought  the 
local  bankers  together,  or  at  least  most  of  them,  on  common 
ground  for  the  common  good  and  protection  of  all. 

The  San  Francisco  Clearing  House  Association  was  organ- 
ized by  the  leading  commercial  banks  and  began  operations 
in  March,  1876.  At  first  only  15  banks  were  represented  in 
the  organization.  Five  other  banks  became  members  in  July, 
1877,  making  twenty  members  at  that  time. 

Other  banks  were  admitted  later  on,  but  they  only  served 
to  fill  vacancies  caused  by  withdrawals  or  mergers,  so  that  at 
no  time  perhaps  has  there  been  over  twenty  members. 

The  original  fifteen  members  were  as  follows :  The  Bank 
of  California,  The  Bank  of  British  Columbia,  The  Bank  of 
British  North  America,  The  Bank  of  San  Francisco,  B.  David- 


120  Banking  in  California 

son  &  Co.,  Ir.  Belloc,  Donohoe,  Kelly  &  Co.,  The  First  National 
Gold  Bank  of  San  Francisco,  Hickox  &  Spear,  London  and  San 
Francisco  Bank,  Limited,  The  Merchants'  Exchange  Bank, 
Sather  &  Co.,  Swiss-American  Bank,  The  Anglo-Californian 
Bank,  Limited,  and  Wells  Fargo  &  Co.  Six  of  these  were 
private  banks,  four  were  foreign  incorporated  banks,  one 
national  and  four  State  banks. 

The  five  banks  admitted  in  July,  1877,  were  The  Nevada 
Bank  of  San  Francisco,  Lazard  Freres,  Pacific  Bank,  The 
National  Gold  Bank  and  Trust  Company  and  Tallant  &  Co. 
Two  of  these  were  private  banks,  subsequently  incorporated. 

In  1883  the  bank  of  Crocker,  Woolworth  &  Co.  was  admit- 
ted, followed  in  1884  by  Grangers  Bank  of  California,  and  in 
1889  by  the  American  Bank  and  Trust  Company. 

Only  one  bank  came  in  during  the  following  decade,  and 
that  was  the  Bank  of  Sisson,  Crocker  &  Co.  in  January,  1893. 

The  Mercantile  Trust  Company  of  San  Francisco  was 
added  in  1899. 

There  were  three  additions  in  1901,  namely.  The  Cana- 
dian Bank  of  Commerce,  The  Western  National  Bank  of  San 
Francisco  and  Germania  Trust  Company. 

Additional  Members. 

The  International  Banking  Corporation  joined  in  1902, 
the  Italian-American  Bank  and  the  National  Bank  of  the 
Pacific  at  San  Francisco  in  1905,  the  City  and  County  Bank 
in  1906,  the  Merchants'  National  Bank  of  San  Francisco  and 
the  Bank  of  Italy  in  1909,  the  Assistant  Treasurer  of  the 
United  States  in  1910. 

The  Bank  of  Italy  was  given  the  number  35,  which  was 
the  total  number  admitted  in  numerical  order.  The  Assistant 
United  States  Treasurer  has  no  number  in  the  membership, 
but  is  simply  known  as  A.  T. 

Of  the  nineteen  members  in  May,  1910,  only  five  remain 
under  practically  their  original  titles.  These  are  The  Bank  of 
California  National  Association,  The  Bank  of  British  North 


Banking  in  California  ^^^ 

America,  The  Donohoe-Kelly  Banking  Company,  The  First 
National  Bank  and  the  Anglo  and  London  Paris  National. 

The  San  Francisco  National  is  the  outcome  of  the  private 
bank  of  Sather  &  Co.  of  1876. 

The  Wells-Fargo  Nevada  National  is  the  result  of  the 
merger  of  the  Wells  Fargo  &  Co.  of  1876  with  the  Nevada 
Bank  of  1877,  which  in  1898  became  the  Nevada  National. 

The  Anglo- Calif  ornian  of  1876  went  into  the  national  sys- 
tem in  1909  and  was  then  merged  into  the  London  Paris 
National. 

The  nineteen  members  in  May,  1910,  were  as  follows: 
The  Bank  of  California  National  Association  (since  February 
5),  The  Bank  of  British  North  America,  The  Donohoe-Kelly 
Banking  Company,  The  First  National,  The  San  Fran- 
cisco National,  Wells  Fargo  Nevada  National,  The  Anglo  and 
London  Paris  National,  The  Crocker  National,  The  American 
National,  The  Mercantile  National  (since  March  5th),  The 
Canadian  Bank  of  Commerce,  The  Western  National,  The 
Central  Trust  Company,  International  Banking  Corporation, 
Italian- American  Bank,  City  and  County  Bank,  The  Merchants 
National,  Bank  of  Italy  and  the  Assistant  Treasurer  of  the 
United  States.  The  last  named  made  his  first  clearing  on 
January  18,  1910. 

Between  1877  and  1909,  there  were  seventeen  withdrawals 
through  failures,  voluntary  liquidation  or  merger.  Ten  of 
the  number  were  from  either  one  of  the  two  first  named  causes. 
The  other  seven  were  through  mergers.  One  of  the  original 
members  went  through  two  transformations,  and  was  then 
itself  transformed  into  another  by  the  merger  process. 

Officers  of  Association. 

The  first  president  of  the  San  Francisco  Clearing  House 
Association  was  Hon.  Milton  S.  Latham,  president  of  the 
London  and  San  Francisco  Bank,  and  once  Governor  of  Cali- 
fornia and  also  a  representative  of  the  State  in  the  United 
States  Senate.    Homer  S.  King  was  the  first  secretary,  retain- 


122  Banking  in  California 

ing  the  office  to  July  1,  1876.    Thomas  S.  Taylor  was  the  first 
manager  with  W.  F.  Burke  as  assistant. 

A.  McKinlay,  manager  of  the  Bank  of  British  North 
America,  was  elected  president  in  1877,  and  was  re-elected 
annually  thereafter  until  and  including  1883.  George  C. 
Hickox  was  the  secretary  in  1877  and  Mr.  Taylor  manager 
until  August  31st. 

Charles  Sleeper  succeeded  Mr.  Taylor  on  September  1, 
1877,  and  has  been  re-elected  annually  ever  since,  with  W.  F. 
Burke  as  his  assistant  until  1885,  and  since  than  with  J.  T. 
Burke  as  assistant. 

J.  S.  Hutchinson  became  the  secretary  in  1878,  and  was 
chosen  annually  thereafter  until  1893. 

Hon.  F.  F.  Low,  one  of  the  managers  of  the  Anglo-Cali- 
fornian  Bank,  once  Governor  of  the  State,  Minister  to  China 
and  also  superintendent  of  the  United  States  Mint  in  the  city, 
was  the  president  in  1884. 

John  McKee,  of  the  Tallant  &  Co.  Bank,  became  president 
in  1885,  and  retained  the  position  until  1893. 

Thomas  Brown,  cashier  of  the  Bank  of  California,  became 
president  in  1894,  and  retained  the  office  until  1902,  with 
John  D.  McKee  as  secretary  for  the  first  of  those  years,  Gustav 
Friederick  for  the  next  two  and  Frederick  W.  Ziele  for  the 
last  two  years, 

Hon.  William  Alvord,  former  mayor  of  San  Francisco  and 
president  of  the  Bank  of  California,  served  the  association  as 
president  in  1893  and  1894,  with  Mr.  Ziele  as  secretary. 

In  1905,  Homer  S.  King,  who  became  president  of  the 
Bank  of  California  upon  the  death  of  Mr.  Alvord,  was  chosen 
president  instead  and  retained  the  position  until  1910.  Mr. 
Ziele  was  secretary  in  1905,  Wellington  Gregg,  Jr.,  in  1906, 
1907  and  part  of  1908,  when  he  was  succeeded  by  William  H. 
High,  who  still  holds  that  position. 

James  K.  Lynch,  vice-president  of  the  First  National,  was 
elected  president  in  1910. 


Banking  in  California 


123 


Annual  Clearings. 

Following  is  a  statement  of  the  annual  clearings  of  the 
association  since  the  opening  day  on  March  11,  1876 : 


1876 $476,123,238 

1877 519,948,804 

1878 715,329,320 

1879 553,953,956 

1880 486,725,954 

1881 598,696,832 

1882 629,114,120 

1883 617,921,854 

1884 556,857,691 

1885 562,344,738 

1886 642,221,391 

1887 829,181,930 

1888 836,735,954 

1889 843,386,151 

1890 851,066,173 

1891 892,426,713 

1892 815,368,724 


1893 $    699,285,778 

1894 658,526,806 

1895 692,079,240 

1896 683,229,599 

1897 750,789,144 

1898 813,153,024 

1899 971,015,072 

1900 1,029,582,595 

1901 1,178,169,536 

1902 1,373,362,025 

1903 1,520,200,682 

1904 1,534,631,137 

1905 1,834,549,789 

1906 1,998,400,779 

1907 2,133,883,626 

1908 1,757,141,850 

1909 1,979,872,570 


Causes  for  Variation. 

While  the  annual  clearings  have  more  than  quadrupled 
since  1877,  there  have  been  many  interruptions  to  the  general 
upward  trend.  These  interruptions  have  arisen  from  various 
causes,  some  of  them  normal  and  some  of  them  abnormal. 

For  example,  the  heavy  clearings  in  1878,  were  probably 
due  to  the  climax  in  the  mining  excitement  in  the  previous 
four  years  and  to  the  big  grain  crop  in  that  year  as  compared 
with  previous  years  and  those  that  followed.  The  heavy 
shrinkage  in  stock  values  immediately  following  were  reflected 
in  the  clearings. 

Other  causes  for  those  lean  years  were  the  sand  lot  agita- 
tion; the  adoption  of  a  new  State  constitution  and  the  reduced 
prices  for  grain  and  other  surplus  products.  The  poorest  of 
these  years  was  1880,  when  the  clearings  were  only  68  per  cent 
of  1878. 

A  gain  of  over  $100,000,000  in  clearings  in  the  following 
year  was  due  to  a  fair  wheat  crop  and  better  prices. 

There  was  but  little  change  in  the  volume  of  clearings 
between  1881  and  1886. 


124  •  Banking  in  California 

From  1887  to  1892,  both  years  inclusive,  the  clearings 
showed  a  new  and  much  higher  level  with  little  variation. 

In  1893,  came  the  country- wide  bank  panic,' and  there  was 
a  general  financial  stringency,  from  which  there  was  but  little 
recovery  for  the  next  three  years.  The  bank  panic  in  1893  was 
probably  the  most  far  reaching  since  1836. 

Whatever  were  the  financial  losses  in  that  panic,  there 
was  some  compensation  in  the  fact  that  it  settled  the  agitation 
that  had  been  in  progress  for  fifteen  years  for  free  silver  coin- 
age on  the  basis  of  16  to  1. 

If  that  measure  had  succeeded,  the  country  would  not  have 
enjoyed  the  same  degree  of  prosperity  which  it  has  since  wit- 
nessed. 

During  the  four  lean  years  incident  to  that  panic,  the 
clearings  were  invariably  below  $700,000,000.  The  total  for 
1894  was  26%  per  cent  under  those  for  1892. 

From  1894  up  to  and  including  1907  there  was  a  steady 
and  a  marked  gain  from  year  to  year,  the  total  for  the  interval 
amounting  to  over  200  per  cent. 

The  steady  expansion  in  these  clearings  from  1894  to  1907 
would  doubtless  have  continued  if  it  had  not  been  for  the 
money  panic  which  started  in  the  East  in  October,  1907. 

Labor  Saving  Effect. 

The  use  of  this  agency  has  effected  a  wonderful  savings  in 
many  ways,  chiefly,  of  course,  in  the  cost  of  labor.  It  would 
simply  have  been  impossible  to  have  made  these  settlements 
under  the  system  in  vogue  in  this  city  up  to  1876. 

The  counting  in  and  the  counting  out  and  the  carrying 
about  of  the  large  sums  of  money  represented  in  these  can- 
celled checks  and  drafts  and  other  forms  of  bank  paper  could 
not  have  been  done  without  a  greatly  increased  force  and  a 
greatly  increased  outlay  of  money  for  salaries  and  other  ex- 
penses. 

Even  with  this  agency  and  the  use  of  certificates,  much 
coin  has  to  be  sent  to  the  clearing  house  every  day  to  settle  the 


Banking  in  California  125 

balances  between  the  banks.  Sometimes  these  amounts  of  coin 
from  a  single  bank  are  so  large  and  heavy  that  they  have  to  be 
expressed  through  the  streets. 

In  the  last  calendar  year  over  59  per  cent  of  the  balances 
was  settled  in  United  States  Treasury  gold  certificates. 

The  use  of  these  certificates  was  resumed  on  August  19, 
1899.  From  that  date  to  the  close  of  1909,  the  balances 
amounted  to  $1,802,200,388,  of  which  30.33  per  cent  was  settled 
in  coin  and  69.67  per  cent  in  United  States  Treasury  gold 
certificates  and  clearing  house  loan  certificates. 

It  is  claimed  that  these  certificates  saved  a  four-fold  hand- 
ling of  an  equal  amount  of  gold  coin,  the  four-fold  weight 
of  which  would  have  been  equal  to  18,511,382  pounds  avoirdu- 
pois, or  9,255  short  tons. 

The  effect  of  the  panic  of  1907  is  clearly  brought  out  in 
the  total  clearings  in  the  fourth  quarter  of  that  year  which 
covers  the  first  three  months  of  that  trouble.  In  that  year 
the  quarterly  clearing  fell  off'  from  $599,364,942  for  the  first 
quarter  to  $443,099,102  for  the  fourth  quarter. 

In  the  previous  two  years  the  clearings  for  the  fourth 
quarter  were  larger  than  in  either  of  the  first  three  quarters 
for  the  same  years. 

Prior  to  1900,  the  monthly  clearings  rarely  exceeded 
$100,000,000.  Since  then  it  has  been  still  more  rare  to  find  a 
month  which  did  not  show  an  excess  of  $100,000,000,  and  in 
at  least  a  half  dozen  cases  the  monthly  totals  have  been  $200,- 
000,000  and  upwards. 

Emergency  Certificates. 

The  withdrawal  of  money  from  its  accustomed  channels 
in  the  fall  of  1907  was  so  general  throughout  the  country,  that 
some  other  medium  of  exchange  became  imperative. 

For  the  first  time  in  the  history  of  the  association,  resort 
was  had  to  the  issuance  of  clearing  house  certificates,  secured 
by  a  deposit  of  selected  collateral  securities. 


126  Banking  in  California 

Nothing  but  the  urgency  of  the  occasion  could  have  ever 
permitted  such  a  procedure  in  the  face  of  the  following  clause 
from  the  State  constitution  under  Article  XII,  Section  5 : 

'*No  corporation,  association  or  individual  shall  issue  or 
put  in  circulation,  as  money,  anything  but  the  lawful  money 
of  the  United  States." 

It  was  claimed  that  these  certificates  were  not  money  any 
more  than  a  warehouse  certificate  is  money,  and  that  there 
were  court  decisions  supporting  that  view. 

The  course  pursued  seemed  to  be  justified  by  the  condi- 
tions that  confronted  everybody  in  all  the  walks  of  life. 

It  was  a  case  of  self-defense,  and  self-defense  has  always 
been  justified. 

At  any  rate  the  action  was  fully  vindicated  by  the  result 
attained.  The  stringency  was  overcome  and  financial  losses 
were  averted. 

This  was  the  sole  motive  for  the  course  pursued,  and  it  has 
been  fully  justified. 

The  association  authorized  about  $13,000,000  of  these  cer- 
tificates, but  they  were  not  all  issued,  nor  were  all  those  issued 
put  in  circulation. 

As  soon  as  the  money  stringency  passed,  the  certificates 
were  promptly  redeemed,  at  least  as  far  as  presented.  It  is 
probable  that  some  were  lost,  while  some  are  known  to  have 
been  retained  as  souvenirs  of  the  panic  and  the  angels  that 
brought  relief  to  suffering  humanity. 

In  consequence  of  the  local  bank  troubles  of  1907,  and 
with  the  view  of  raising  the  standard  of  the  banking  business 
in  San  Francisco,  the  association  authorized  the  appointment 
of  a  specal  examiner  for  the  clearing  house  banks  and  for 
such  other  banks  as  clear  through  the  member  banks  of  the 
association.    Mr.  A.  C.  Kains  was  given  this  appointment. 

It  is  generally  conceded  that  this  action  was  wise,  and 
that  the  results  will  be  ample  compensation  for  the  outlay. 
This  private  examination  is  supplemental  to  State  supervision, 
and  in  no  way  a  substitute  for  it. 


Banking  in  California  127 

Los  Angeles  Association.  , 

Los  Angeles  was  the  second  city  in  the  State  to  adopt  the 
Clearing  House  idea. 

The  Los  Angeles  Clearing  House  Association  was  organ- 
ized September  17,  1887.  The  officers  for  the  year  1910  are: 
W.  H.  Holliday,  President;  Stoddard  Jess,  Vice-President, 
and  James  B.  Gist,  Secretary  and  Manager. 

In  all  nineteen  banks  have  been  admitted,  but  nine  of 
these  have  been  dropped,  incident  to  mergers  and  other  causes, 
leaving  the  following  ten  as  active  members:  Farmers  and 
Merchants  National  Bank,  First  National  Bank,  Merchants 
National  Bank,  National  Bank  of  California,  Central  Na- 
tional Bank,  Citizens  National  Bank,  Broadway  Bank  & 
Trust  Co.,  Commercial  National  Bank,  United  States  National 
Bank  and  National  Bank  of  Commerce. 

The  annual  clearings  for  the  year  ending  October  1st  have 
been  as  follows : 


Years  Clearing 

1888 $36,050,981 

1889 36,873,242 

1890 31,019,722 

1891 37,096,125 

1892 39,529,902 

1893 45,240,726 

1894 44,669,100 

1895 57,046,832 

1896 61,356,142 

1897 59,323,917 

1898 72,229,037 


Years  Clearing 

1899 $  86,341,617 

1900 113,766,378 

1901 145,170,809 

1902 225,917,730 

1903 288,527,583 

1904 332,715,240 

1905 449,953,040 

1906 549,648,224 

1907 623,170,919 

1908 481,851,178 

1909 630,620,133 


However  these  agencies  may  be  viewed  in  the  smaller 
cities  and  towns,  they  are  certainly  indispensable  in  all  the 
larger  cities.  Under  no  circumstances  would  either  San  Fran- 
cisco or  Los  Angeles  dispense  with  the  privileges  of  these  labor- 
saving  agencies. 

But  this  is  not  the  only  benefit  derived  from  their  pres- 
ence and  operation,  when  conscientiously  conducted. 

They  undoubtedly  have  the  effect  of  raising  and  maintain- 
ing a  much  safer  standard  of  banking  than  would  prevail  if 
they  were  not  in  existence. 

The  Association  not  only  exerts  this  salutary  influence 


12^  Banking  in  California 

over  its  own  members,  but  it  has  a  good  influence  over  the 
non-member  banks  in  the  same  community. 

It  was  only  a  few  months  ago  that  the  members  of  the 
Los  Angeles  Association  endeavored  to  tone  up  some  of  the 
small  banks  in  that  city  by  refusing  them  admission  to  the 
Association  with  a  mimimum  capital  of  less  than  $200,000. 

In  some  quarters  this  action  was  severely  criticised,  but 
the  right  to  fix  terms  of  membership  in  any  organization  can- 
not be  questioned.  Evidently  the  members  of  the  Los  Angeles 
Association  did  not  care  to  assume  any  responsibility  for  these 
small  banks,  which  in  the  large  cities  are  not  permitted  under 
the  national  system. 

Of  course,  a  small  bank  can  be  conducted  as  safely  as  a 
large  one,  even  in  a  populous  city,  but  never  as  economically. 
It  is  because  the  small  bank  in  a  large  city  has  to  take  greater 
risks,  or  at  least   often  does,  that  it  becomes  a  greater  menace. 

No  bank  can  fail  without  some  direct  or  indirect  injury 
to  other  banks  in  the  same  community. 

San  Francisco  has  suffered  much  from  the  failure  of 
small  banks  operated  by  incompetent  people.  This  is  not  say- 
ing that  all  small  banks  are  managed  by  incompetent  people, 
nor  is  it  saying  that  incompetent  people  do  not  sometimes 
have  control,  at  least  temporarily,  of  large  banks.  But  in- 
competents do  not  so  often  get  control  of  large  banks,  because 
the  large  banks  are  generally  in  the  Clearing  House  Associa- 

Other  Cities  Adopt  System. 

In  more  recent  years  these  agencies  for  the  clearance  of 
bank  checks  have  been  established  in  several  other  cities  in 
the  State. 

For  some  years  prior  to  1906,  some  of  the  Oakland  banks 
cleared  to  some  extent  through  the  San  Francisco  Association. 
In  May,  1906,  the  Oakland  bankers  organized  an  Association 
with  clearings  as  follows : 

In  1906,  eight  months $120,853,367 

In  1907 140,416,039 

In  1908 76,847,793 

In  1909 96,527,088 


Security  Savings  Bank,  San  Francisco,   1871 


Banking  in  California  129 

The  San  Jose  Clearing  House  was  organized  in  the  latter 
part  of  1906,  and  its  clearings  for  1897  were  $20,500,000, 
against  $23,246,315  in  1908,  and  $25,592,841  in  1909. 

Four  other  interior  cities  followed  in  1907.  At  Sacra- 
mento the  clearings  for  1908  were  $44,014,126,  against  $54,- 
512,723  in  1909. 

At  Stockton,  the  clearings  were  $24,179,908  in  1908  and 
$29,195,022  in  1909.  P.  B.  Fraser  is  president  and  James  S. 
Abeel  is  secretary. 

0.  J.  Woodward,  of  the  First  National,  is  president  of  the 
Fresno  Association,  and  the  clearings  were  $20,568,154  in 
1908  and  $29,108,946  in  1909. 

The  San  Diego  Association  reports  clearings  of  $37,565,- 
853  in  1908  and  $52,276,425  in  1909. 

Pasadena  organized  an  association  on  January  3.  1910. 
with  C.  J.  Hall  as  president  and  H.  S.  Noe  as  secretary  and 
manager.  Clearings  to  April  30  were  $15,146,950.  The  mem- 
ber banks  are  the  First  National,  Pasadena  National,  Crown 
City  National,  Union  National,  American  Bank  and  Trust 
Company,  Bank  of  Commerce  and  San  Gabriel  Valley  Bank. 

The  clearings  of  these  Associations  are  published  weekly 
and  those  of  the  San  Francisco  Association  daily. 

The  information  thus  made  public  of  what  the  banks  are 
doing  in  different  parts  of  the  State  is  of  interest  to  many 
people,  not  only  locally  but  throughout  the  State  and  even 
beyond  its  boundaries. 

The  Los  Angeles  Association  followed  the  example  of  San 
Francisco  in  the  appointment  of  a  special  examiner  for  the 
banks  under  its  supervision,  and  for  this  service  Mr.  John  W. 
Wilson  was  selected.  Mr.  Wilson  was  formerly  a  National 
Bank  Examiner. 

In  1908  a  State  Clearing  House  Association  was  formed, 
with  the  idea  of  grouping  the  banks  in  districts  outside  of 
San  Francisco  and  Los  Angeles,  and  with  the  appointment  of 
a  special  examiner  for  each  district. 


130  Banking  in  California 

These  examiners  are  to  be  experts  in  the  banking  busi-' 
ness,  and  the  results  of  their  work  will  no  doubt  be  beneficial. 
It  is  hoped  that  this  plan  will  eventually  be  adopted. 

Bank  Legislation  Demanded. 

Prior  to  1878.  there  was  no  official  supervision  of  the  State 
banks  in  California,  either  by  the  State,  the  county  or  any 
municipality.  But  the  need  for  some  legislation  of  that  sort 
became  more  and  more  imperative  as  the  years  went  by. 

This  feeling  became  quite  general  in  the  early  seventies, 
and  was  frequently  discussed  by  the  press  and  among  the 
people.  It  was  at  first  confined  almost  exclusively  to  the  sav- 
ings banks,  which,  at  that  time  were  beginning  to  multiply 
and  to  come  into  operation  in  all  of  the  more  prominent  com- 
munities. 

The  managers  of  the  savings  banks  objected  to  being  thus 
singled  out.  claiming  that  their  depositors  were  well  protected 
by  the  better  class  of  security  on  which  most  of  their  loans 
were  made. 

Thus  there  were  advocates  for  and  objectors  to  the  spy 
system,  which  was  the  term  some  people  applied  to  the  ex- 
amination of  banks  by  State  officials. 

Finally  the  question  was  carried  up  to  the  Legislature  to 
be  threshed  out,  and  from  all  accounts  the  threshing  was  a 
pronounced  success. 

Dr.  May  introduced  the  bill.  It  provided  for  a  bank  of- 
ficial to  examine  and  report  upon  the  condition  of  the  sav- 
ings banks  of  the  State  at  a  salary  of  $5,000  per  annum. 
There  were,  of  course,  many  other  provisions  in  the  bill 
which  are  not  essential  to  name. 

It  is  sufficient  to  say  that  when  the  legislature  got 
through  with  the  bill,  Dr.  May  did  not  recognize  it  as  the 
one  he  had  presented  nor  did  any  one  else. 

Instead  of  one  examiner,  at  a  salary  of  $5,000  per  annum, 
the  number  was  raised  to  three  and  the  salary  was  fixed  at 
$3,000  per  annum  for  each,  and  iastead  of  confining  the  busi- 


Banking  in  California  131 

ness  of  examinations  to  the  savings  banks,  it  was  extended  to 
cover  all  incorporated  banks. 

It  was  the  legislature  of  1877-78  that  handled  this  work. 
The  notable  failures  among  commercial  banks  in  the  fall  of 
1875  were  entirely  responsible  for  incorporating  this  class 
under  the  provisions  of  the  new  law  at  that  particular  time. 
This,  of  course,  was  also  the  excuse  for  the  appointment  of 
three  commissioners,  instead  of  one,  owing  to  the  greater 
number  of  banks  to  be  supervised. 

Bank  Commission  Act. 

This  measure  was  signed  by  Governor  Irwin  on  March 
30,  1878,  and  it  stipulated  that  the  appointments  should  be 
made  on  or  before  May  15,  1878. 

The  law  provided  for  three  commissioners  at  a  salary  of 
$3,000  each  per  annum ;  also  for  $1,500  per  annum  for  travel- 
ing expenses,  $1,800  for  a  clerk,  $900  for  rent,  and  $200  for 
fuel,  stationery  and  supplies,  making  the  total  outlay  $13,400 
to  be  paid  by  the  banks  by  a  pro  rata  assessment  on  their 
deposits. 

The  first  commissioners  were  Evan  J.  Coleman,  Robert 
Watt  and  James  P.  Murphy.  No. two  commissioners  could  be 
selected  from  the  same  county,  and  so  the  first  three  in  the 
order  named  were  from  the  counties  of  San  Francisco,  Marin 
and  Santa  Clara.  The  first  secretary  was  Rufus  Shoemaker 
of  Nevada  county. 

The  commissioners  were  obliged  to  furnish  bonds  of  $20,- 
000  each,  to  keep  their  office  open  from  9  to  4  o'clock,  and  to 
give  their  whole  time  during  those  hours  to  the  work.  • 

The  banks  were  required  to  make  reports  to  the  commitv 
sioners  verified  under  oath  on  the  first  of  January  and  the 
first  of  July,  and  in  addition  the  commissioners  were  obliged 
to  examine  every  bank  under  their  jurisdiction  at  least  once 
every  year  and  as  much  oftener  as  they  deemed  necessary. 

The  commissioners  began  their  office  work  on  May  24th. 
As  the  system  was  entirely  new,  there  were  many  prelimin- 
aries to  be  arranged,  including  the  preparation  of  blanks, 


^32  Banking  in  California 

books  and  other  stationery,  together  with  a  list  of  the  banks 
and  the  amounts  of  the  tax  that  should  be  levied  upon  each 
for  the  support  of  the  work. 

These  preliminaries  having  been  completed,  the  commis- 
sioners were  in  condition  to  enter  upon  the  duties  for  which 
they  were  appointed. 

They  had  no  special  knowledge  of  the  condition  of  any 
bank  in  the  State,  but  deemed  it  best  to  make  a  beginning  in 
San  Francisco,  the  city  by  law  specified  as  their  place  of 
business. 

Just  how  they  selected  the  bank  in  which  to  commence 
operations  is  not  known,  or  at  least  is  not  remembered.  It 
was  probably  done  by  lot,  so  as  to  avoid  any  charge  of  dis- 
crimination. 

Whatever  the  course  pursued  to  determine  this  matter, 
the  Masonic  Savings  and  Loan  Bank  was  the  first  visited  in 
their  official  capacity.  This  bank  was  neither  the  oldest  nor 
the  youngest  bank  in  the  city,  it  having  been  organized  in 
November,  1869. 

Unsound  Banking  Revealed. 

The  examination  of  the  loans  in  this  bank  had  not  pro- 
ceeded far  before  a  class  of  paper  was  found  that  the  com- 
missioner deemed  quite  unsatisfactory  and  that  to  eliminate 
it  would  impair  the  capital  of  the  bank. 

This  information  was  communicated  to  the  officers,  who 
were  given  the  opportunity  to  make  good  the  impairment. 
The  officers  did  not  take  the  same  view  of  the  discredited 
paper,  and  therefore,  did  not  consider  the  capital  impaired, 
and  so  refused  to  put  up  any  new  money  for  that  purpose. 

What  these  securities  were  to  which  the  commissioners 
objected  is  probably  not  generally  known,  but  is  believed  that 
they  were  called  Navy  Paymaster's  vouchers  or  certificates, 
and  that  the  money  advanced  upon  them  was  received  by  Mr. 
Pinney,  a  clerk  in  the  Paymaster's  office.  Later  on  this  was 
shown  to  be  forged  paper. 


Banking  in  California  133 

Refusing  to  make  good  the  impaired  capital,  there  was 
but  one  thing  for  the  commissioners  to  do,  and  they  did  that 
one  thing  by  closing  the  doors  of  the  bank  on  August  20,  1878. 

The  action  was  a  surprise  to  the  community,  for  the  bank 
bore  a  good  reputation  and  was  supposed  to  have  had  some 
sort  of  an  endorsement  from  a  fraternal  order  of  high  stand- 
ing. 

The  commissioners  themselves  were  no  doubt  surprised 
and  pained  as  well,  and  they  were  sharply  criticised  for  their 
action,  and  unjustly.  It  would  have, been  far  more  agreeable 
to  them  to  have  found  all  the  securities  satisfactory. 

The  next  bank  in  the  city  to  be  visited  was  found  to  be 
in  a  solvent  condition,  and  this  was  a  relief  to  all. 

The  third  bank  examined  was  the  Farmers  and  Mechanics 
Savings  Bank.  This  bank  did  a  mixed  business  and  some  of 
the  collateral  did  not  meet  the  approval  of  the  commissioners 
and  the  managers  refused  to  make  good  the  alleged  impair- 
ment of  capital.  The  bank  owed  its  depositors  the  sum  of 
$373,675  and  the  capital  was  only  $60,000.  It  was  closed  by 
the  commissioners  on  September  3,  1878.  In  the  case  of  the 
Masonic  Bank  the  amount  due  depositors  was  $1,150,698. 

The  fourth  bank  visited  proved  to  be  in  a  worse  condition 
than  the  first.  This  was  the  third  bank  of  its  class  in  the  city, 
having  been  organized  in  1860.  It  was  called  the  French 
Mutual  Provident  Loan  and  Savings  Society,  and  was  without 
capital  stock. 

More  Unsound  Banking. 

The  bank  had  been  prosperous  from  the  start,  and  bore 
a  good  reputation.  It  owed  its  depositors  $5,503,140,  and 
was  a  regular  dividend  payer. 

In  common  with  the  outside  public,  the  commissioners 
entertained  a  good  opinion  of  the  bank  until  they  began  to 
examine  the  character  of  its  securities.  It  was  then  that  they 
discovered  that  the  bank  bore  a  better  reputation  than  it 
deserved. 


134  Banking  in  California 

The  manager  of  the  bank  was  practically  supreme,  and 
when  the  commissioners  informed  him  of  the  disclosures  they 
had  made,  he  was  quite  mortified,  and  his  sudden  death  while 
the  examination  was  still  pending  cast  a  gloom  over  the  com- 
munity. The  bank  was,  of  course,  closed.  A  new  organiza- 
tion was  soon  afterwards  effected  under  the  name  of  the 
French  Savings  and  Loan  Society  with  a  capital  stock.  This 
bank  undertook  the  liquidation  of  the  assets  of  the  failed 
bank,  and  did  the  work  well. 

Later  on  in  the  same  year  several  of  the  city  banks  were 
passed  as  solvent  by  the  commissioners  until  they  reached  the 
Odd  Fellows'  Savings  Bank,  organized  under  the  mutual  sys- 
tem in  October,  1866.  For  twelve  years  the  bank  had  been 
doing  quite  well,  accumulating  a  large  line  of  deposits  and 
paying  satisfactory  interest  on  the  same. 

The  commissioners  soon  found  unsatisfactory  collateral 
among  its  securities  for  loans.  The  closing  up  of  three  banks 
by  these  officials  resulted  in  a  run  on  the  Odd  Fellows.  As 
an  offset  to  this  condition,  the  bank  was  re-organized  with  a 
capital  stock  on  the  7th  of  August,  of  which  about  $129,000 
was  paid  up. 

All  this  had  taken  place  before  the  commissioners  en- 
tered the  bank,  and  their  discoveries  stopped  further  pay- 
ments on  the  capital  stock,  and  on  the  7th  of  February,  1879, 
it  was  voted  to  go  into  liquidation.  At  that  time  the  bank  still 
owed  the  depositors  $2,117,121. 

These  troubles  led  to  the  voluntary  retirement  of  the 
Franco- American  Savings  Bank  in  1881,  after  an  existence  of 
four  years.    This  bank  paid  all  obligations  in  full. 

Before  the  commissioners  commenced  the  examination  of 
banks  in  the  interior  of  the  State,  several  found  it  to  their 
advantage  to  retire  from  business.  This  list  of  voluntary  re- 
tirements included  two  in  Sacramento,  and  one  in  Napa,  and 
one  in  San  Jose.  Still  another  took  the  same  course  in  Marys- 
ville  in  1881. 


Banking  in  California  135 

Eight  Banks  Drop  Out  in  Two  Years. 

There  was  a  net  loss  of  eight  savings  banks  in  the  first 
two  years  of  the  operation  of  the  new  law  and  a  net  gain  of 
two  commercial  banks.  The  elimination  of  these  savings 
banks  took  out  from  active  use  about  $24,000,000  in  deposits 
and  over  $26,000,000  in  resources.  It  also  resulted  in  a  re- 
duction of  over  $6,000,000  in  the  resources  of  the  commercial 
banks,  though  there  was  a  gain  of  $4,000,000  in  the  deposits 
of  the  same. 

Just  what  would  have  happened  to  the  State  banks  in 
those  two  years  if  there  had  been  no  official  examinations  au- 
thorized or  made,  of  course,  cannot  be  definitely  stated. 

The  examinations  had  disclosed  unsound  conditions,  and 
such  conditions  cannot  exist  long  without  undermining  the 
organization  giving  them  hospitality.     That  much  is  certain. 

The  examinations  not  only  eliminated  these  conditions 
from  the  suspended  banks,  but  they  undoubtedly  eliminated 
them  from  other  banks  not  so  badly  contaminated,  at  that 
time.  Furthermore,  they  must  have  acted  as  a  deterrent 
against  yielding  to  temptations  leading  in  that  direction. 

Unpleasant  as  this  work  was  to  all  concerned  and  especi- 
ally to  the  commissioners,  it  was  a  good  work  and  a  necessary 
work.  It  saved  a  great  deal  more  than  it  cost.  It  put  the 
banks  left  in  operation  on  a  better  basis  than  they  were  before 
the  business  was  undertaken. 

This  remark  is  meant  to  apply  to  the  banks  as  a  whole  and 
not  to  individual  banks,  many  of  which  were  in  just  as  good 
condition  before  the  investigation  as  afterwards. 

Nor  was  the  good  work  of  the  weeding  out  of  the  weak 
banks  of  immediate  benefit  to  the  remaining  banks  as  a  whole. 

Such  a  wholesale  elimiuation  of  banks  in  a  State  in  that 
short  interval  necessarily  weakened  public  confidence  in  the 
banking  system.  This  happening  at  a  time  when  demagogues 
in  the  public  streets  and  squares  were  daily  and  nightly  be- 
rating the  banks  as  the  oppressors  of  the  working  people, 
greatly  intensified  the  situation. 


136  Banking  in  California 

It  was  only  after  the  full  effect  of  the  storm  had  been 
experienced,  and  the  shattered  confidence  of  the  public  had 
been  restored,  that  the  real  benefit  of  the  cleaning  out  came 
to  be  realized  in  all  parts  of  the  State.  From  that  time  and 
for  some  years  afterwards  the  banks  had  much  less  to  annoy 
them  and  a  greater  degree  of  solid  prosperity. 

Private  Banks  Put  Under  Supervision. 

Two  years  previous  to  the  passage  of  the  act  creating  the 
Board  of  Bank  Commissioners,  the  legislature  passed  an  act 
requiring  the  publication  of  semi-annual  reports  from  all  the 
banks  in  the  State  for  January  1st  and  July  1st.  The  private 
banks  paid  but  little  attention  to  this  law,  many  of  them 
claiming  that  as  they  were  not  incorporated  they  were  not 
under  the  control  of  the  State. 

In  1887,  the  legislature  passed  a  law  requiring  private 
banks  to  make  semi-annual  reports  to  the  commissioners  on  the 
same  dates  as  the  incorporated  banks,  to  which  they  com- 
plied. The  effect  of  this  law  was  to  induce  several  private 
banks  to  incorporate. 

It  was  not  until  1905  that  the  private  banks  were  placed 
under  the  jurisdiction  of  the  commissioners,  who  thereafter 
examined  their  condition  as  they  had  been  doing  in  the  case 
of  incorporated  banks. 

The  first  general  report  from  the  private  banks  of  the 
State  under  the  law  of  1887  was  made  on  July  1st  of  that 
year,  and  a  detailed  report  of  the  condition  of  each  of  the 
29  banks  forwarding  their  statements  to  the  commissioners 
for  that  date  was  prepared  and  published  by  the  writer  in  the 
following  August.  That  was  probably  the  first  general  and 
detailed  statement  of  the  private  banks  of  California  ever 
submitted  to  the  public. 

The  law  of  1905  placing  these  banks  in  the  same  category 
as  the  incorporated  with  respect  to  personal  examinations  by 
State  officials  led  several  others  to  assume  a  corporate  charac- 
ter, thus  further  reducing  the  number  since  in  operation. 


Banking  in  California  137 

The  number  of  private  banks  in  operation  in  the  State 
since  1875  has  varied  from  15  to  34,  while  the  average  for 
the  whole  period  has  not  been  over  20. 

From  1887  to  1889,  both  years  inclusive,  there  was  an 
average  of  31  of  these  banks  in  existence,  and  their  aggregate 
resources  varied  from  $10,876,000  to  $11,815,000  and  their 
deposits  from  $5,253,000  to  $6,477,000. 

From  resources  of  $8,749,000  and  deposits  of  $4,401,000 
in  1890,  these  totals  were  reduced  in  1895  to  $2,516,000  and 
$919,000  respectively.  From  1894  to  1903,  the  resources  were 
invariably  under  $3,000,000,  while  the  deposits  were  invari- 
ably under  $2,000,000. 

In  1906,  the  34  banks  reported  resources  of  $7,096,000 
and  deposits  of  $3,811,000. 

The  last  report  of  private  banks  by  the  commissioners 
was  April  28,  1909,  when  15  banks  reported  resources  of  $4,- 
553,000  and  deposits  of  $2,868,000. 

Since  then  all  distinctions  of  commercial  banks  have  been 
eliminated  from  the  tabulated  reports. 

New  Bank  Commission  Act. 

In  1907  the  minimum  capital  of  commercial  banks  was 
fixed  at  $25,000,  and  this  law  was  made  retroactive  so  that 
private  banks  with  less  than  that  amount  of  paid-up  capital 
had  to  make  good  or  retire.  Some  of  them  took  the  latter 
course. 

The  Bank  Commissioners  faced  some  trying  experiences 
in  the  bank  panics  of  1893  and  1907.  In  the  former  year 
about  30  banks  in  the  State  had  to  close  their  doors  for  one 
day  or  more,  but  nearly  all  subsequently  resumed.  In  1907 
the  commissioners  were  obliged  to  put  16  banks  out  of  commis- 
sion because  of  their  inability  to  meet  the  demands  made 
upon  them.  This  was  exclusive  of  the  four  branches  of  one 
of  those  banks  and  a  single  branch  of  another,  thus  increas- 
ing the  number  to  21,  the  largest  number  of  suspensions  for 
good  cause  ever  reported. 


138  Banking  in  California 

In  1903,  soon  after  inauguration  of  Governor  Pardee,  the 
act  creating  the  Board  of  Bank  Commissioners  in  1878  with 
all  the  amendments  thereto  subsequently  made  was  suspended, 
pending  the  adoption  of  a  new  act  to  cover  practically  the 
same  ground  as  the  one  it  was  to  supersede. 

Up  to  that  time  the  board  had  consisted  of  three  members. 
One  of  the  reasons  the  street  assigned  for  this  change  was  to 
put  some  new  men  in  the  place  of  those  legislated  out  of  of- 
fice. The  new  board  was  to  have  four  members,  two  for  the 
first  year  to  be  appointed  for  two  years  and  two  for  four 
years,  and  thereafter  all  commissions  to  be  for  four  years. 
By  this  arrangement  the  board  would  always  have  two  hold- 
overs. 

There  was  no  change  made  in  the  salaries  of  the  commis- 
sioners, though  the  additional  member  made  the  outlay  for 
that  purpose  $3,600  more.  The  salary  of  the  secretary  was 
increased  from  $200  to  $300  per  month,  and  the  board  was 
to  have  his  services  in  the  examination  of  banks  whenever  they 
needed  it.  An  increased  allowance  was  made  for  transporta- 
tion and  other  expenses. 

The  license  fee  for  transacting  business  was  raised  to  $40 
in  addition  to  the  pro  rata  tax  on  deposits.  A  minimum 
amount  of  $25,000  was  named  for  capital,  which  was  to  be 
graded  up  according  to  population. 

During  the  interregnum  of  the  suspension  of  the  old  act 
and  the  adoption  of  the  new  one,  applications  were  filed  with 
the  Secretary  of  State  for  upwards  of  60  banks,  most  of  which 
were  granted  before  the  new  act  took  effect. 

Men  Who  Served  as  Commissioners. 

Two  members  of  the  first  board  served  out  their  four 
years.  Mr.  Murphy  retired  after  the  first  year  and  was  suc- 
ceeded by  William  F.  White,  father  of  Senator  White. 

The  second  board  named  consisted  of  J.  E.  Famum,  Jo- 
seph M.  Litchfield  and  J.  L.  Rathbone,  but  Mr.  White  claimed 
that  his  commission  was  for  the  full  four  years  and  not  for 
the  unexpired  term  of  Mr.  Murphy.    Mr.  Rathbone  declined 


Banking  in  California  139 

to  contest  the  claim,  and  before  the  third  four-year  term 
could  be  named,  Mr.  White  had  been  appointed  to  succeed 
himself,  which  gave  him  a  term  of  eight  years  in  the  service. 
The  other  two  men  named  with  him  were  W.  W.  Moreland 
and  A.  W.  Potts. 

Upon  the  expiration  of  Mr.  White's  term,  James  A 
Thompson  was  appointed,  but  resigned  before  the  expiration 
of  his  commission. 

Three  new  men  were  then  named  for  the  new  board. 
These  were  Albert  Gerberding,  W.  H.  Knight,  and  Charles 
H.  Dunsmoor. 

The  next  board  consisted  of  Paris  Kilburn,  H.  W.  Magee 
and  J.  B.  Fuller. 

Then  came  John  Markley,  A.  W.  Barrett  and  Barnard 
Murphy. 

Governor  Gage  appointed  as  commissioners,  Guy  Bur- 
ham,  J.  B.  Wright  and  Dan  Kevane. 

The  board  was  then  increased  to  four  members,  and  Gov- 
ernor Pardee  named  the  following:  Guy  Barham,  William 
H.  High,  Herman  Silver  and  Charles  H.  Dunsmoor.  Mr. 
Wright,  of  the  previous  board,  was  tendered  the  appoint- 
ment, but  being  in  ill  health  declined  the  same. 

Mr.  High  resigned  in  1904  to  accept  the  position  as 
manager  of  the  International  Banking  Corporation  and  Zoeth 
S.  Eldredge  was  appointed  to  fill  the  vacancy.  He  also  re- 
signed, and  J.  C.  Currier  was  appointed  to  complete  the  four- 
year  term  laid  down  by  Mr.  High. 

Mr.  Barham  resigned  in  January,  1895,  and  N.  Black- 
stock  succeeded  him. 

Upon  Governor  Gillett  's  accession  to  office,  the  board  con- 
sisted of  Messrs.  Blackstock,  Currier,  Silver  and  Dunsmoor. 
The  term  of  Currier  and  Dunsmoor  were  to  expire  on  June  29, 
1907,  and  Silver  and  Blackstock  two  years  later. 

Cost  of  the  Service. 

Through  expiration  of  terms  and  resignations  it  was 
Governor  Gillett 's  privilege  to  appoint  five  to  this  office.  These 


1^^  Bankmg  in  California 

were  Henry  Sherer,  John  C.  Lynch,  W.  C.  Watson,  C.  H. 
Garoutte  and  William  F.  Vawter.  Mr.  Watson  succeeded  Mr. 
Lynch  and  he  with  the  other  three  were  legislated  out  of  of- 
fice in  1909,  when  for  the  second  time  the  Board  of  Bank  Com- 
missioners was  abolished,  retiring  under  the  terms  of  the  new 
order  on  June  30,  1909. 

Since  then  an  entirely  new  system  has  been  in  operation, 
which  places  the  whole  supervision  of  the  banks  under  one 
man  whose  title  is  that  of  superintendent  of  banks,  with  au- 
thority to  name  all  his  assistants,  and  with  authority  to  spend 
a  sum  for  maintaining  the  service  not  exceeding  $75,000  per 
annum,  to  be  paid  by  the  banks. 

This  is  considerably  in  excess  of  the  annual  expense 
under  the  Board  of  Bank  Commissioners  even  during  the 
most  extravagant  year  of  its  existence. 

The  expense  for  the  first  year  under  the  commissioners 
was  $13,400.  Subsequently  the  amount  authorized  for  fuel, 
etc.,  was  increased  to  $500  and  later  on  to  $1,200,  but  other- 
wise, the  annual  budget  was  not  changed  until  1887. 

In  that  year  the  salaries  of  the  commissioners  were  in- 
creased from  $3,000  to  $3,600,  traveling  expenses  from  $1,500 
to  $3,000,  salary  of  secretary  from  $150  to  $200,  rent  from 
$900  to  $1,200,  making  a  total  of  $18,600. 

In  1903,  there  was  an  addition  of  one  commissioner,  an 
increase  of  $1,200  in  secretary's  salary  and  other  additional 
allowances,  bringing  up  the  total  outlay  to  $29,200.  Later 
there  were  further  additions  until  the  total  reached  nearly 
$37,000. 

From  first  to  last  the  cost  of  maintaining  the  Bank  Com- 
mission was  about  $540,000,  all  of  which  sum  was  paid  by  a 
special  tax  on  the  banks  served.  All  other  commissions  created 
by  the  legislature  have  been  maintained  by  drafts  on  the 
general  fund,  and  there  is  no  reason  that  this  commission 
should  have  been  an  exception. 


Banking  in  California  141 

Graded  Capital  by  Population. 

The  first  attempt  at  grading  bank  capital  in  this  State 
was  made  by  the  legislature  in  1905,  under  a  provision  in- 
corporated in  the  banking  laws  approved  March  20th  of  that 
year. 

Under  that  provision  the  minimum  amount  of  capital  re- 
quired to  operate  a  bank  was  fixed  at  $25,000  in  communities 
of  5,000  inhabitants  or  under;  between  5,000  and  10,000,  the 
amount  required  was  $50,000 ;  between  10,000  and  25,000,  the 
amount  was  limited  to  $100,000,  in  localities  over  25,000  in- 
habitants no  bank  could  be  organized  with  a  capital  less  than 
$200,000. 

A  superior  court  judge  in  Sacramento  county  ruled  this 
provision  was  unconstitutional,  and  it  was  repealed  at  the 
next  session  of  the  legislature  in  1907. 

In  lieu  of  the  repealed  provision  another  was  adopted 
grading  capital  on  the  volume  of  the  deposits,  but  no  bank 
was  to  be  organized  with  a  capital  under  $25,000.  The  new 
provision,  which  is  still  in  force,  exempt  savings  and  loan  cor- 
porations. 

This  provision  requires  that  the  capital  shall  be  equal  to 
at  least  10  per  cent  of  the  deposits,  until  the  amount  of  the 
deposits  reach  a  total  that  would  necessitate  a  paid-up  capi- 
tal of  $1,000,000. 

In  construing  this  provision,  net  surplus  may  be  counted 
as  capital. 

This  means  that  a  bank  having  $1,000,000  in  deposits 
must  have  a  paid-up  capital,  including  net  surplus,  of  at  least 
$100,000. 

Probably  this  last  named  plan  of  grading  capital  is  quite 
as  satisfactory  as  the  former  one,  but  the  first  named  is  just 
as  legal  as  the  last  named,  the  opinion  of  the  learned  judge 
to  the  contrary  notwithstanding. 

Grading  capital  according  to  population  has  been  a  pro- 
vision of  the  national  bank  law  for  many  years,  and  its  con- 
stitutionality has  never  been  questioned. 


142  Banking  in  California 

If  there  are  any  State  statutes  that  make  such  a  provis- 
ion unconstitutional  in  California  they  are  not  recalled.  It 
appeared  to  be  a  good  regulation,  and  having  the  endorsement 
of  a  national  precedent,  it  is  not  clear  why  it  should  have  been 
repealed. 

Branch  Banking. 

Branch  banking  is  not  a  new  feature,  except  in  this  State, 
where  it  was  first  introduced  to  any  considerable  extent  in 
1906. 

Its  advent  here  was  due  to  the  great  calamity  of  that  year, 
which  temporarily  put  out  of  commission  nearly  every  bank 
in  the  city,  both  large  and  small. 

This  was  not  the  worst  feature  of  the  situation.  It  drove 
the  people  and  their  places  of  business  into  the  residence  dis- 
trict of  the  city.  Even  after  the  big  fire  had  exhausted  itself, 
and  the  vaults  were  sufficiently  cooled  to  be  opened  with 
safety,  what  was  left  of  the  bank  buildings  in  the  burned  dis- 
trict were  too  remote  from  the  stores  to  be  conveniently 
reached. 

There  was,  therefore,  no  alternative  but  to  open  branches 
of  the  main  offices  in  the  new  and  temporary  business  sections. 

Several  of  the  banks  did  this,  some  of  them  having  even 
two  branches  and  others  three  or  four. 

This  condition  prevailed  in  San  Francisco  for  three 
years,  but  before  the  close  of  1909  practically  all  of  these 
branches  were  abolished  and  the  business  centered  once  more 
at  the  main  office. 

Outside  of  the  city  quite  a  number  of  banks  have  estab- 
lished branches  in  or  near  the  vicinity  of  the  main  office,  and 
this  feature  has  been  fully  endorsed  by  those  in  authority. 

The  report  under  the  new  system  of  banking  in  this 
State  for  March  29,  1910,  gave  the  number  of  banks  in  Cali- 
fornia under  State  supervision  at  477,  of  which  number  32 
were  classed  as  branches. 

This  is  probably  the  largest  number  ever  reported,  un- 


Banking  in  California  143 

less  an  exception  should  be  made  for  the  conditions  in  San 
Francisco  from  1906  to  1909. 

Under  British  rule,  branch  banking  is  quite  common  and 
is  supposed  to  be  quite  profitable.  It  extends  banking  facili- 
ties to  communities  that  have  not  sufficient  patronage  to  sup- 
port a  fully  equipped  and  independent  bank. 

Branch  banking  and  chain  banking  are  nearly  of  the 
same  order,  and  in  the  panic  of  1893  in  this  country  they 
were  the  source  of  much  alarm  and  not  a  little  trouble. 

Bank  Changes  in  Los  Angeles. 

It  is  an  old  adage  that  it  is  better  to  try  and  fail  than 
never  to  try  at  all. 

One  is  reminded  of  that  in  looking  over  the  many  bank 
changes  that  have  taken  place  in  Los  Angeles  since  the  busi- 
ness was  first  introduced  in  that  city. 

Activity  is  better  than  inactivity,  even  if  many  of  the 
efforts  fail  to  prove  satisfactory. 

Private  banking  served  Los  Angeles  in  the  early  sixties. 
In  1868,  Hellman,  Temple  &  Co.  were  acting  in  that  capacity. 
Later  Mr.  Hellman  retired  to  form  a  bank  of  his  own,  and 
then  it  was  Temple  &  Workman.  Mr.  Hellman  incorporated 
the  Farmers  and  Merchants  Bank  in  February,  1871. 

The  First  National  is  the  outgrowth  of  the  Commercial 
Bank.  Later  it  absorbed  the  Bank  of  America,  previously 
known  as  the  Los  Angeles  County  Bank,  and  still  later  it  ab- 
sorbed the  Los  Angeles  National  and  the  Southwestern  Na- 
tional. Subsequently  the  stockholders  of  the  First  National 
were  the  owners  of  the  Los  Angeles  Trust  Company  and  the 
Metropolitan  Bank  and  Trust  Company,  which  were  after- 
wards fused  into  the  Los  Angeles  Trust  and  Savings  Bank 
under  the  same  ownership. 

The  Merchants  National's  first  name  was  the  Southern 
California  National. 

The  Citizens'  Bank  became  the  Citizens'  National,  and 
in  1909  absorbed  the  American  National,  previously  known  as 


144  Banking  in  California 

the  California  Bank,  but  after  it  was  nationalized,  it  absorbed 
the  Bank  of  Commerce. 

The  Central  National  is  a  consolidation  of  the  Central 
Bank  and  the  State  Bank  and  Trust  Company.  That  part 
of  the  business  that  could  not  go  into  the  combine  was  put 
under  the  name  of  the  Central  Trust  Company. 

The  Security  Savings  Bank  has  absorbed  three  other 
banks  of  like  character  previously  known  as  the  Los  Angeles, 
Main  Street  and  Southern  California. 

The  German- American  Savings  is  a  consolidation  of  that 
bank  with  the  Union  Savings,  the  latter  having  previously 
absorbed  the  Columbia  Savings. 

The  Home  Savings  first  absorbed  the  Manhattan  Sav- 
ings and  later  the  Bank  of  Los  Angeles.  The  latter  bank  had 
previously  absorbed  the  Miners  and  Merchants  (formerly 
known  as  the  Fraternal  Savings  and  Commercial)  and  the 
Mechanics  Bank. 

The  Park  Bank  is  a  consolidation  of  the  Dollar  Savings 
Bank  and  Trust  Company  and  the  Central  Trust  Company. 

The  Southern  Trust  Company  was  organized  to  take  over 
the  business  of  the  Mercantile  Savings  Bank  and  Trust  Com- 
pany. 

The  Oil  and  Metals  Bank  and  Trust  Company  is  a  con- 
solidation of  the  Columbia  Trust  Company  with  the  Union 
Exchange  Bank. 

The  Merchants  Bank  and  Trust  Company  is  a  consolida- 
tion of  the  Merchants  Trust  Company  with  the  Western  State 
Bank. 

The  above  is  probably  not  a  complete  list  of  the  bank 
changes  in  Los  Angeles,  but  is  considered  accurate  as  far  as 
it  goes. 

Of  the  31  banks  in  that  city,  10  are  members  of  the  Clear- 
ing House,  17  are  affiliated  with  members,  while  the  other  four 
have  no  connection  whatever  with  the  Association. 

Los  Angeles  has  an  All  Night  and  Day  Bank,  the  only 
one  in  the  State. 


11151" 


The  First  National  Bank,  Oakland,   1875 

and 

First  Trust  and  Savings  Bank,  1907 


1  JEffiMi 

> 

► 

1  1           ""^ 

Wells  Fargo  Nevada  National  Bank,  San  Francisco,  1852-1875-1905 


Banking  in  California  145 

Bank  Buildings. 

It  was  said  of  one  of  the  early  banks  that  it  shared  an 
ordinary  building  on  Kearny  and  Washington  streets  with 
a  livery  stable,  and  that  it  paid  $1,500  per  month  for  the 
privilege,  and  considered  itself  fortunate  to  get  even  that. 

Another  early  banker,  who  occupied  a  one-story  brick 
building,  found  himself  quite  popular  through  his  brick  and 
mortar  environment,  because  of  the  assurance  of  protection 
to  the  money  and  valuables  stored  therein. 

Still  another  early  constructed  brick  building,  erected 
for  bank  purposes,  and  at  the  time  considered  fire  proof  and 
burglar  proof,  was  not  proof  against  a  lot  of  excited  deposi- 
tors who  wanted  their  money  and  could  not  get  it  and  who 
would  have  pulled  every  brick  out  of  the  structure  if  they 
had  not  been  restrained.  In  fact  the  manager  is  said  to  have 
told  the  crowd  that  the  deposits  of  the  bank  were  in  the 
bricks. 

Later  on  one  of  the  early  savings  banks  was  content  to 
occupy  a  leasehold  in  a  second  story  for  a  time,  in  lieu  of 
getting  anything  more  desirable. 

The  first  incorporated  savings  bank,  in  1857,  began  a 
long  and  successful  career  in  very  modest  quarters  under  a 
lease.  A  little  later  it  owned  a  building  in  which  to  transact 
its  business.  Still  later  it  purchased  the  adjoining  building, 
tore  out  the  front  wall  of  both,  and  substituted  an  iron  front 
from  the  sidewalk  to  the  roof,  a  distance  of  four  stories,  the 
first  iron  front  on  a  scale  of  that  magnitude  in  the  city  up  to 
that  time.  The  front  of  this  building  was  always  painted 
white,  and  was  very  attractive. 

Still  later,  but  also  in  the  sixties,  the  first  trust  company 
took  a  lease  in  the  basement  of  a  four  story  building  on  the 
southeast  corner  of  California  and  Leidesdorf  streets,  and 
started  on  a  new  line  of  banking.  Five  years  later  it  was  the 
owner  of  a  four  story  and  basement  modern  building  on  the 


146  Banking  in  California 

northeast  corner  of  California  and  Sansome  streets,  and  oc- 
cupied the  whole  of  the  main  floor  with  a  large  general  bank- 
ing business. 

Banks  Erect  Their  Own  Buildings. 

About  1866  two  fine  bank  buildings  were  erected  on  Cali- 
fornia street,  namely,  on  the  northwest  comer  of  California 
and  Sansome  streets,  for  the  Bank  of  California,  and  one  on 
the  northwest  corner  of  California  and  Liedesdorf  streets  for 
the  London  and  San  Francisco  Bank,  Limited.  The  former 
building  was  removed  in  1905  to  allow  of  the  erection  of  a 
larger  and  more  elegant  one,  to  which  the  business  of  the  bank 
was  returned  in  September,  1908.  This  building  is  occupied 
entirely  by  the  bank,  and  is  unique  in  all  its  appointments. 
The  other  building  was  taken  over  by  the  Bank  of  California 
at  the  time  it  absorbed  the  business  of  the  London  and  San 
Francisco  Bank,  and  was  subsequently  sold  to  the  San  Fran- 
cisco National  and  through  the  absorption  of  that  bank  again 
becomes  the  property  of  the  Bank  of  California,  now  known 
as  The  Bank  of  California  National  Association. 

Other  city  banks  have  since  followed  the  above  examples 
in  the  erection  of  buildings  of  their  own,  many  of  which  have 
greatly  exceeded  the  cost  of  those  put  up  prior  to  1870. 

The  four  Italian  banks  all  own  the  buildings  they  oc- 
cupy, one  of  which  is  rated  at  about  $500,000. 

All  the  city  savings  banks  own  their  places  of  business, 
and  three  of  them  estimate  the  value  of  the  same  at  $1,000,000 
and  upwards,  and  the  others  at  $150,000  to  $700,000. 

A  much  admired  sky  scraper  building  is  that  on  the 
northwest  corner  of  Post  and  Montgomery,  jointly  occupied 
and  owned  by  the  First  National  Bank  and  the  First  Federal 
Trust  Company,  and  valued  at  $2,000,000.  Directly  opposite 
is  the  tall  building  of  the  Wells  Fargo  Nevada  National  Bank 
valued  at  over  $2,000,000.  The  Union  Trust  Company,  now 
occupying  a  portion  of  the  same  building,  will  soon  remove 
to  its  elegant  new  building  at  Market  and  Grant  avenue.  The 
vacated  space  will  give  the  Wells-Fargo  Nevada  National 


Banking  in  California  147 

Bank  the  additional  room  it  has  long  needed  for  its  growing 
business.  The  Savings  Union  Bank  will  get  into  its  new  build- 
ing at  the  northwest  corner  of  O'Farrell  and  Grant  avenue 
before  the  end  of  the  calendar  year. 

The  German  Savings  and  Loan  Society  began  business 
in  modest  quarters  on  the  south  side  of  California,  about  one 
hundred  feet  west  of  Montgomery,  but  soon  realized  the  need 
of  better  and  larger  facilities  and  so  procured  a  site  on  the 
same  street  directly  opposite,  on  which  was  erected  a  fine  and 
substantial  building,  which  it  has  since  occupied,  except  for 
the  interval  required  to  repair  and  restore  what  was  damaged 
or  destroyed  by  the  fire  of  April,  1906.  During  this  interval 
the  interior  was  much  improved  and  rendered  far  more  at- 
tractive than  ever. 

The  bank  owns  its  own  premises  which  at  one  time  were 
valued  at  $350,000,  but  which  have  since  been  written  down 
from  year  to  year,  until  now  the  same  are  carried  at  the 
nominal  value  of  $1. 

This  is  a  novel  feature,  but  so  exceptionally  good  that  a 
duplicate  of  it  is  not  easily  cited  either  on  the  part  of  a  bank 
or  any  other  corporation.  Writing  up  the  value  of  such  an 
asset  to  make  a  flattering  financial  statement  is  more  fre- 
quently done  than  writing  it  down  in  a  gradual  way  until  it 
finally  disappears.  A  strong  and  prosperous  bank  can  do 
that  sort  of  thing. 

Another  peculiar  feature  in  the  administration  of  the  af- 
fairs of  the  German  Savings  and  Loan  Society  is  the  crea- 
tion of  a  pension  fund  for  its  employees  which  now  amounts  to 
$100,000.  That  is  a  praiseworthy  thing  for  any  corporation 
to  undertake. 

In  addition  to  its  main  office  on  California  street,  the 
German  Savings  and  Loan  Society  established  a  branch  at 
the  Mission  in  1906,  which  has  been  quite  successful,  and  in 
1909,  a  second  branch  was  put  in  operation  in  the  Richmond 
district.     This  has  also  met  the  expectations  of  the  manage- 


148  Banking  in  California 

ment.    A  fine  site  has  been  secured  for  this  branch,  on  which 
a  substantial  building  will  be  erected. 

Per  Cent  Resources  in  Bank  Premises. 

According  to  an  analysis  made  at  intervals  of  five  years 
from  June  30,  1878,  to  June  30,  1910,  the  amount  invested  in 
bank  premises  by  the  State  banks,  as  compared  with  their  ag- 
gregate resources,  has  varied  from  a  fraction  under  2  per 
cent,  up  to  4  per  cent. 

In  1878  there  was  invested  in  such  premiums  $3,025,654. 
which  was  2  per  cent  of  the  resources,  whereas  in  1910,  the 
value  of  such  investments,  including  furniture,  fixtures,  and 
safe  deposit  vaults,  was  $22,656,600,  or  4  per  cent  of  the  re- 
sources. Up  to  1900,  this  item  seldom  exceeded  2  per  cent, 
and  was  never  over  2^4  per  cent. 

Apportioning  the  value  of  the  bank  premises  in  1878 
among  the  84  banks  incorporated  in  that  report,  it  shows  an 
average  of  $36,000  to  each  for  a  lot  and  the  improvements 
thereon,  but  eliminating  the  banks  in  rented  quarters,  the 
average  would,  of  course,  have  been  much  greater. 

In  the  last  report  of  the  retired  Bank  Commissioners  for 
July,  1908,  the  506  banks  reported  their  investments  at  $18,- 
788,200,  which  shows  an  average  of  $37,000  to  each,  an  in- 
crease of  only  $1,000  in  the  average  over  1878. 

In  1878,  one  bank  in  San  Francisco  reported  the  value  of 
its  premises  at  $250,000,  which  was  probably  the  largest 
amount  thus  invested  at  that  time,  while  in  1910  two  banks  in 
that  city  reported  bank  premises  at  $2,000,000  each. 

In  August,  1900,  only  19  of  the  53  savings  banks,  103  of 
the  178  of  the  incorporated  commercial  banks  and  12  of  the 
private  banks  in  the  State  owned  the  premises  they  occupied. 
The  average  value  of  these  premises  was  $134,000  for  the  sav- 
ings, $45,200  for  the  commercials  and  $9,000  for  the  private 
banks. 

In  the  report  for  1908,  in  San  Francisco,  9  of  the  12  sav- 
ings and  13  of  the  36  commercials,  owned  the  premises  occu- 
pied, the  average  values  of  which  were  $562,600  and  $406,000 


Banking  in  California  1^^ 

respectively.  In  Oakland  these  averages  were  $305,500  and 
$6,700;  Los  Angeles,  $398,000  and  $124,000,  and  for  other 
sections  of  the  State,  $30,200  and  $24,800.  Of  the  506  banks 
under  State  supervision  at  that  time,  245  owned  the  building 
occupied. 

National  Bank  Buildings. 

The  first  bank  under  this  system  in  the  State  opened  in 
leased  quarters,  and  that  was  the  case  with  most  of  the  first 
ten,  though  one  of  that  ten  owned  a  substantial  structure. 

In  1890  there  were  37  of  these  banks  in  operation  in  the 
State  with  an  average  of  $40,000  invested  in  bank  premises 
and  average  resources  of  $840,000  Ten  years  later  the  bank 
premises  averaged  $30,000  for  38  banks  and  $1,600,000  for 
average  resources. 

In  1905,  there  were  87  national  banks  in  the  State,  an 
increase  of  130  per  cent  in  five  years.  Value  of  bank  premises 
in  that  year  was  $40,000  for  each  bank,  while  the  resources 
averaged  nearly  $2,000,000  to  each  bank. 

Between  May,  1905,  and  April,  1910,  there  was  a  further 
increase  of  100  per  cent  in  the  number  of  these  banks,  the  total 
being  176,  with  bank  premises  averaging  $54,000  and  resources 
averaging  $2,235,000. 

It  may  be  of  interest  to  show  how  these  averages  are 
distributed.  In  the  matter  of  bank  premises  the  average  for 
the  San  Francisco  banks  is  $387,000 ;  in  Los  Angeles  $84,000 ; 
and  in  other  parts  of  the  State  a  little  below  $30,000.  As  to 
the  aggregate  resources,  the  San  Francisco  banks  show  an 
average  of  $18,123,000 ;  the  Los  Angeles  banks,  $7,444,000,  and 
the  banks  outside  of  these  two  cities,  $800,000. 

Much  of  the  development  indicated  by  these  large  totals 
is  the  result  of  operations  effected  in  the  nine  months  ending 
with  the  close  of  March,  1910.  During  that  short  interval 
there  was  a  net  gain  of  25  banks,  $95,000,000  in  resources 
and  $2,688,000  in  the  value  of  bank  premises. 

These  gains  are  not  so  much  the  result  of  the  establish- 
ment of  primary  associations,  though  many  of  this  character 


^^^  Banking  in  California 

have  come  into  operation.  The  heaviest  part  of  the  work  is 
due  to  the  conversion  of  some  few  State  banks  of  large  re- 
sources to  the  national  system  and  to  one  or  more  prominent 
mergers. 

It  is  a  satisfaction  to  know  that  while  these  operations 
have  in  some  respects  been  a  direct  loss  to  the  State  system 
and  to  some  extent  a  direct  gain  to  the  national  system, 
the  State  itself  has  not  suffered  in  the  least  from  the 
change.  The  resources  and  influence  of  the  banks  are  even 
greater  and  probably  more  beneficial  than  before. 

Bank  Buildings  for  All  Classes. 

What  the  banks  in  California  have  accomplished  in  the 
way  of  acquiring  title  to  the  ground  and  improvements  they 
occupy  in  the  transaction  of  their  business  is  indeed  very 
gratifying.  Very  many  of  these  banks  are  still  in  leased 
quarters,  but  it  is  hoped  that  a  considerable  number  of  these 
may  ere  long  have  buildings  of  their  own,  and  thus  set  a  good 
example  to  other  business  corporations. 

Including  furniture,  fixtures,  safe  deposit  vaults  and  other 
accessories,  there  was  reported  at  the  close  of  March,  1910, 
the  sum  of  $32,195,000  for  bank  premises  at  practically  an 
average  of  $50,000  apiece  for  all  the  banks  in  active  operation 
in  the  State  at  that  time. 

Eliminating  the  corporations  that  do  not  own  their  build- 
ings the  average,  of  course,  would  be  much  higher,  but  not 
on  the  whole  at  all  extravagant,  considering  the  nature  and 
importance  of  the  business. 

These  bank  buildings  are  of  all  sizes  as  to  breadth  and 
height,  of  varied  styles  of  architecture  and  materials,  and 
of  many  different  values. 

Scores  upon  scores  of  good,  serviceable  structures  may 
be  found  that  have  been  listed  under  a  value  of  $10,000. 
Some  of  these  may  have  cost  more  and  may  be  worth  more, 
but  for  justifiable  reasons  in  the  judgment  of  the  owners  they 
have  been  reported  at  or  under  that  total. 


Banking  in  California  151 

There  is  also  a  very  large  number  that  are  valued  between 
$10,000  and  $30,000,  and  a  fair  number  above  $30,000,  but 
under  $50,000.  Between  that  figure  and  $100,000  the  number 
is  much  smaller,  while  the  number  in  excess  of  $100,000  is  still 
smaller. 

Very  few  reach  $1,000,000  and  upwards  and  only  two  are 
put  down  at  $2,000,000. 

Some  of  the  more  costly  of  these  structures  have  been 
erected  for  income  purposes,  the  banks  using  only  a  small 
portion  of  the  floor  space. 

The  number  of  fine  buildings  owned  and  used  exclusively 
by  the  banks  of  California  was  never  so  large  as  at  present, 
and  the  projectors  of  these  improvements  have  been  warmly 
complimented  for  their  enterprise  and  good  taste.  Future 
builders  will  do  well  to  follow  their  example  as  far  as  possible. 

Fewer  and  Stronger  Banks. 

This  statement  suggests  a  query  and  that  is  what  is  the 
rightful  equation  between  the  number  of  banks  in  a  com- 
munity or  in  a  State  and  the  aggregate  resources  of  such 
banks  ? 

In  other  words,  is  it  a  good  indication  of  healthful  prog- 
ress when  the  number  of  banks  is  increased  in  a  greater  ratio 
than  the  resources  ? 

If  the  aggregate  banking  resources  of  a  State  amounts 
to  an  even  $500,000,000,  can  that  amount  of  resources  be 
handled  more  efficiently  and  more  economically  by  400  banks 
than  by  500  banks? 

This  is  not  an  idle  query  nor  is  it  a  novel  one.  Judged 
by  the  bank  mergers  which  have  been  taking  place  in  various 
parts  of  the  country  in  the  past  twenty  years  or  more,  it  is 
evidently  entitled  to  further  consideration  and  particularly 
in  this  State  where  banks  have  come  into  existence  at  times 
so  rapidly. 

In  the  first  report  submitted  by  the  late  Board  of  Bank 
Commissioners  in  1878,  the  savings  banks  in  the  State  showed 
resources  averaging  nearly  $3,000,000  to  each  bank,  while 


1^2  Banking  in  California 

the  incorporated  commercial  banks  had  an  average  of  $1,280,- 
000  and  the  two  classes  combined  an  average  of  $1,800,000. 

Seven  years  later  the  average  of  the  savings  banks  was  a 
little  over  $3,000,000,  that  of  the  commercials  $1,040,000  and 
the  combined  average  $1,500,000. 

Five  years  later  the  first  named  class  fell  below  $3,000,000, 
the  commercials  dropped  to  $800,000  and  both  classes  aver- 
aged $1,120,000. 

At  the  end  of  the  next  five  years  the  average  of  the 
savings  was  $2,700,000,  that  of  the  commercials  (including 
18  privates)  $700,000,  and  all  combined  $1,120,000. 

In  August,  1900,  the  savings  showed  an  average  of  $3,- 
250,000,  the  commercials  $750,000  and  both  classes  $1,300,000. 

Five  years  later  there  was  an  average  of  $2,500,000  for 
the  savings,  $800,000  for  the  commercials  and  $1,260,000 
for  all. 

In  July,  1908,  the  average  of  the  savings  dropped  to 
$2,000,000,  the  commercials  to  $700,000  and  the  total 
$1,060,000. 

The  last  statement  of  the  Commissioners  for  April  28, 
1909,  gave  the  savings  banks  an  average  of  $2,170,000,  the 
commercials  $740,000  and  both  classes  $1,120,000. 

The  total  average  for  all  classes  on  March  29,  1910,  was 
$1,225,000. 

Two  Bank  Systems — State  and  National. 

Opinions  differ  as  to  which  banking  system  is  the  best — 
State  or  National.  It  is  known  that  there  is  a  difference 
between  them.  Both  have  good  features.  If  the  best  in  both 
could  be  incorporated  and  harmonized  in  either,  the  one  uni- 
form system  would  be  preferable  to  the  two  systems. 

No  one  wants  a  reproduction  of  the  variety  that  obtained 
under  the  old  State  bank  systems  prior  to  the  Civil  War,  yet 
in  some  of  the  States  the  bank  laws  were  excellent. 

But  the  good,  bad  and  indifferent  under  that  patchwork 
of  banking  went  by  the  board  in  the  introduction  of  the 


Banking  in  California  153 

national  system  of  1862  which  eliminated  State  bank  notes 
by  the  imposition  of  a  ten  per  cent  tax  on  such  circulation. 

The  State  bankers  did  not  like  the  innovation  which  that 
change  introduced.  They  not  only  did  not  like  it,  but  they 
were  very  much  provoked  over  it,  and  of  course  were  quite 
unfriendly  to  the  national  system  for  some  time  afterwards. 

Most  of  the  active  bankers  of  1860  are  no  longer  con- 
cerned as  to  what  those  engaged  in  the  business  of  today  think 
about  that  or  any  other  system. 

The  two  systems  of  State  and  National  banking  have 
been  jogging  along  together  for  nearly  fifty  years.  Neither 
has  had  any  serious  quarrel  with  the  other.  Some  of  the  dis- 
tinctive features  of  both  have  been  modified  and  the  sharp 
points  of  contrast  smoothed  by  the  daily  experiences  of  busi- 
ness life. 

This  tendency  to  a  closer  union  between  the  two  has  been 
noted  for  several  years,  but  whether  it  will  finally  lead  to  a 
fusion  of  interests  is  still  problematical,  though  not  impossible. 

It  is  believed  that  the  national  system  and  the  different 
systems  of  State  banking  could  be  harmonized  on  a  common 
basis,  if  the  one  distinctive  feature  of  the  issue  of  circulating 
notes  could  remain  as  now,  under  Government  control,  with 
what  that  necessarily  carries  with  it,  namely.  Government 
supervision  of  the  business  of  the  individual  associations  that 
do  the  practical  part  of  the  banking  business. 

Primarily,  the  national  banking  system  was  organized  to 
operate  exclusively  along  commercial  lines,  thus  excluding  the 
savings  and  trust  features.  The  managers  of  these  banks  have 
found  ways  of  using  these  auxiliaries  without,  in  their  opinion, 
compromising  any  of  their  corporate  rights. 

National  banks  are  not  permitted  to  loan  on  real  estate, 
or  at  least  were  not  in  the  original  act.  Some  of  tEem  in 
later  years  got  around  that  prohibition  by  the  control  of 
State  savings  banks.  Since  then  they  have  been  permitted 
to  issue  term  certificates  of  deposits  on  which  they  pay  int^- 


^^^  Banking  in  California 

est,  the  same  as  some  savings  banks  have  been  doing  for  years, 
and  as  trust  companies  are  allowed. 

National  banks  cannot  establish  branches,  but  State  banks 
having  branches  can  continue  to  operate  them  as  State  banks 
after  the  parent  bank  has  been  converted  to  a  national  bank. 

All  these  and  kindred  differences  are  susceptible  of 
amicable  adjustment,  if  only  there  be  a  willingness  to  yield 
such  minor  points. 

If  the  departmental  system  of  State  banking  were  en- 
grafted upon  the  national  system,  there  would  soon  be  a  con- 
siderable increase  in  the  number  of  these  associations. 

If  the  Government  had  extended  the  same  privilege  to 
State  banks  forty  or  more  years  ago  that  it  did  to  national 
banks  in  the  matter  of  notes  for  circulation  upon  the  same 
kind  and  value  of  security,  there  would  not  have  been  as  many 
national  banks  as  now,  but  there  would  have  been  more  State 
banks. 

In  theory  at  least  departmental  banking  is  a  solution  of 
a  vital  problem  in  banking,  because  it  introduces  a  feature  of 
economy  absolutely  essential  in  small  communities,  where  a 
single  bank  can  do  all  the  business  of  three  banks. 

Departmental  banking  may  not  be  so  essential  in  the 
larger  cties  and  towns,  but  even  in  these  localities  it  may  and 
often  is  a  great  convenience. 

But  if  departmental  banking  is  to  be  the  pronounced 
success  so  generally  promised,  the  theory  upon  which  it  is 
based  must  be  rigidly  adhered  to  and  bank  examiners  must 
give  it  their  special  care. 

The  temptation  to  collusion  and  to  mix  things  up,  where 
all  the  facilities  for  such  connivances  are  so  handy,  will  be 
strong  and  sometimes  hard  to  resist,  even  on  the  part  of  men 
who  really  think  they  are  morally  upright,  but  that  does  not 
controvert  one's  opinion  of  the  theory.  Still,  it  must  be 
remembered  that  all  theories  are  not  practical. 


Banking  in  California  155 

Best  Protected  System. 

Whether  there  are  better  and  therefore  stronger  safe- 
guards against  bank  failures  under  the  national  system  than 
under  State  systems  cannot  be  stated  with  any  definiteness 
without  an  appeal  to  data  not  easily  obtainable. 

In  the  absence  of  such  information  as  to  all  the  States 
or  any  number  of  the  States,  it  may  not  be  amiss  to  give  a 
concrete  example  of  one  State,  in  order  to  see  how  the  two 
systems  have  worked  since  1878,  when  both  were  in  operation, 
and  when  both  were  under  the  supervision  of  either  State  or 
Federal  authority. 

For  this  purpose  California  is  selected,  not  because  its 
State  banking  system  is  any  better  or  any  worse  than  that 
of  any  other  State.  Of  course,  Californians  think  their  sys- 
tem an  exceptionally  good  one.  It  certainly  will  compare 
favorably  with  that  of  many  other  States,  if  not  with  the 
best  of  them. 

The  report  of  the  Comptroller  of  the  Currency  says  that 
up  to  May  1,  1910,  there  had  been  211  national  banks  organ- 
ized in  California,  and  that  out  of  this  number  7  had  become 
insolvent  and  so  went  out  of  existence  with  some  obligations 
unrequited,  and  that  24  others  had  gone  into  voluntary  liqui- 
dation, leaving  180  in  operation  on  that  date. 

This  shows  that  the  retirements  from  all  causes  were 
14.70  per  cent  of  the  organizations,  while  the  suspensions  for 
cause  were  3.31  per  cent  of  the  number  put  in  operation. 

The  number  of  incorporated  banks  in  California  at  the 
time  State  officials  took  up  the  work  of  supervision  was  84. 
The  number  since  incorporated  is  not  definitely  known.  The 
largest  number  in  operation  under  the  State  supervision  was 
507  in  March,  1908.  The  number  of  retirements  either  from 
suspension  or  liquidation,  since  1878,  is  not  known,  but  it  is 
perfectly  safe  to  say  that  the  percentage  is  much  greater 
than  it  was  under  the  national  system. 

Probably  the  worst  twelvemonth  in  the  whole  period  was 
in  the  year  ending  October  1,  1908,  when  the  Commissioners 


1^^  Banking  in  California 

suspended  sixteen  banks  and  five  branches  connected  with 
two  of  the  sixteen.  In  1878  there  were  four  bank  failures 
in  San  Francisco  alone,  while  from  1875  to  1880  there  were 
about  a  dozen. 

Of  the  7  national  bank  suspensions  in  California  only  one 
occurred  in  San  Francisco,  and  that  happened  two  years  after 
it  opened,  and  more  through  incompetency  than  from  any 
other  cause. 

Of  the  9,742  banks  organized  under  the  national  system 
in  the  United  States  from  1862  to  May  1,  1910,  a  fraction 
less  than  27  per  cent  have  retired  from  all  causes  combined, 
and  not  quite  5  per  cent  under  insolvency. 

It  is  not  believed  that  the  State  banks  of  the  whole  coun- 
try can  show  an  equally  good  record  for  the  same  period. 
If  any  one  doubts  the  statement  it  is  up  to  him  to  prove  that 
it  is  erroneous. 

That  the  national  bank  system  is  a  good  one  will  not 
be  seriously  questioned,  nor  that  it  is  the  best  one  in  general 
use  that  the  country  has  ever  had. 

That  there  have  been  isolated  cases  of  maladministration 
of  the  system  is  admitted,  but  that  should  not  be  charged  up 
against  the  system. 

Doubtless  there  have  been  incompetent  examiners,  not  to 
use  a  harsher  term.  But  despite  this  drawback  and  others 
of  a  minor  character,  the  record  is  the  best  proof  of  the  gen- 
eral efficiency  of  the  system. 

One  good  feature  of  the  administration  is  in  the  investiga- 
tion that  takes  place  whenever  an  application  to  organize  a 
national  bank  is  filed.  The  Comptroller  endeavors  to  find  out 
something  about  the  fitness  and  financial  responsibility  of  the 
applicants  and  also  the  needs  of  the  locality  for  a  bank. 

It  is  needless  to  say  that  some  applicants  are  turned  down 
for  what  the  Comptroller  considers  good  cause.  This  is  a 
case  where  an  ounce  of  prevention  is  worth  more  than  a  ton 
of  cure. 


Banking  in  California  157 

State  officials  should  exercise  a  corresponding  amount  of 
care  so  that  between  Federal  and  State  authority  incompetent 
or  otherwise  unfit  persons  should  be  forever  debarred  from 
engaging  in  the  banking  business. 

Institute  of  Bank  Clerks. 

The  American  Bankers'  Association  did  a  good  thing 
when  it  created  the  Institute  of  Bank  Clerks. 

California  was  prompt  and  generous  in  putting  its  seal  of 
approbation  upon  this  feature. 

The  San  Francisco  Institute  of  Bank  Clerks  was  organized 
in  1900,  and  has  been  a  popular  and  growing  organization 
from  the  very  start.  The  membership  is  large,  the  meetings 
are  well  attended  and  the  programs  varied  and  interesting. 

It  has  been  looked  upon  and  quoted  as  holding  a  high 
rank  among  similar  organizations  throughout  the  country. 

It  has  had  the  impetus  of  approval  and  hearty  support 
from  the  senior  officials  in  the  banks,  who  have  not  hesitated 
to  aid  the  movement  in  every  possible  way. 

The  late  E.  F.  Beck,  cashier  of  the  Anglo  and  London 
Paris  National  Bank,  was  a  warm  supporter  of  the  Institute, 
and  helped  in  many  ways. 

James  K.  Lynch,  vice-president  of  the  First  National 
Bank,  and  F.  L.  Lipman,  cashier  of  the  Wells  Fargo  Nevada 
National  Bank,  with  others  that  might  be  named,  have  con- 
tributed in  various  ways  to  its  success. 

Apart  from  the  literary  and  social  character  of  the  Insti- 
tute, both  of  which  have  been  of  a  high  order,  the  more  dis- 
tinctive educational  feature  is  to  be  greatly  commended. 

Any  organization  that  helps  its  miembers  to  greater 
degrees  of  efficiency  along  the  lines  of  their  occupations, 
whether  in  the  arts  or  in  the  professions,  deserves  to  succeed. 

Such  education  in  the  practical  things  of  life  is  not  only 
a  direct  benefit  to  the  recipients  from  any  and  every  point  of 
view,  but  to  the  general  public. 

The  world  is  always  in  need  of  well-trained  people,  and 
well-trained  bankers  are  even  more  essential  than  in  some 


1^^  Banking  in  California 

other  departments  of  activity,  because  of  the  larger  responsi- 
bilities and  the  heavier  burdens  they  must  assume. 

The  Institute  has  furnished  officials  for  several  banks, 
and  they  are  making  good  records  for  themselves  and  for  the 
organizations  with  which  they  are  connected.  It  is  a  good 
service  to  claim  the  attention  of  banks  needing  men  to  fill 
important  positions.  The  Institute  ranks  fifth  in  the  country, 
and  has  500  members. 

Interest  Rates  in  San  Francisco. 

In  1849  men  were  willing  to  pay  10  per  cent  per  month 
for  the  use  of  money  in  San  Francisco,  and  they  did  pay 
it,  not  only  once  or  twice,  but  many  times,  for  that  rate  was 
quite  as  common  then,  considering  the  population  and  the  vol- 
ume of  business  transacted,  as  10  per  cent  per  annum  was 
several  years  afterwards. 

Ten  years  later,  even  mortgage  loans  on  real  estate  in  San 
Francisco  were  2  per  cent  per  month  in  many  cases,  and  occa- 
sionally 3  per  cent,  though  such  loans  were  sometimes  made 
under  2  per  cent. 

It  seems  strange  to  borrowers  of  later  years  that  notes  to 
secure  mortgages  on  real  estate  in  California  for  a  term  of 
years  should  contain  a  clause  fixing  the  rate  of  interest  at  so 
much  per  cent  per  month  instead  of  per  annum. 

But  that  is  the  way  things  were  done  in  this  State  during 
the  first  decade  of  its  occupation  by  the  gold  hunters. 

Some  years  ago  the  writer  had  occasion  to  ascertain  just 
what  rate  borrowers  on  real  estate  security  had  to  pay  for 
money  in  San  Francisco.  For  this  purpose  the  mortgage  rec- 
ords were  consulted.  It  is  doubtful  if  the  big  and  dusty  books 
then  handled  to  secure  this  information  are  now  in  existence, 
as  the  sweeping  fire  of  1906  converted  many  of  these  books 
into  ashes. 

Fortunately  the  copious  notes  of  mortgages  made  in  San 
Francisco  as  early  as  1858  have  been  preserved,  and  therefore 
the  information  as  to  the  rates  of  interest  for  such  loans  are 


Banking  in  California  1^9 

official  and  reliable,  with  the  names  of  both  parties  to  the  loan 
made  and  recorded. 

At  that  early  period  there  was  but  one  incorporated  sav- 
ings bank  in  the  State  that  made  the  loaning  of  money  on 
mortgages  its  special  business.  Two  years  later  a  second 
bank  had  come  into  operation  to  share  this  business.  Both 
of  these  were  San  Francisco  banks  and  both  were  in  existence 
in  May,  1910. 

One  of  the  mortgages  recorded  in  January,  1858,  was 
from  a  private  banker  for  a  loan  of  $40,000  at  1%  per  cent 
per  month.  This  loan  was  recorded  in  volume  37.  Other 
loans  recorded  in  the  same  year  and  in  the  same  volume  varied 
from  11/4  to  3  per  cent  per  month.  Most  of  these  were  for 
amounts  varying  from  $1,000  to  $4,000.  Several  of  them  were 
from  2  to  2^  per  cent,  including  at  least  five  from  the  Savings 
and  Loan  Society. 

The  same  figures  prevailed  in  1859.  There  were  several 
loans  at  3  per  cent  per  month  during  those  two  years,  all 
between  private  parties.  One  of  the  lenders  at  this  rate  was 
a  well-known  financier  of  pioneer  fame. 

The  Hibernia  Savings  and  Loan  Society  began  lending 
money  in  1860  at  2  per  cent  per  month,  which  appears  to 
have  been  the  maximum  bank  rate  for  that  year  and  the  three 
subsequent  years. 

A  notably  long  rate  loan  was  recorded  in  November,  1860, 
between  a  French  capitalist  and  a  leading  real  estate  firm  for 
$40,000  for  a  term  of  five  years  at  7  per  cent  per  annum. 

In  1864  loans  at  2  per  cent  per  month  on  real  estate 
security  in  San  Francisco  were  not  common,  though  there 
were  some.  The  rates  most  generally  recorded  were  11/4  to  1^^ 
per  cent  per  month.  There  were  four  savings  banks  loaning 
mony  in  the  State  in  that  year,  and  of  course  more  or  less 
competition. 

At  the  end  of  another  four  years  there  were  eight  banks 
of  that  character  in  San  Francisco  and  four  outside  of  the 
city,  including  Oakland.  San  Jose,  Stockton  and  Sacramento. 


^^^  Banking  in  California 

In  view  of  this  condition  competition  for  good  loans  was 
more  active  than  ever  and  the  general  rate  was  1  per  cent  per 
month,  though  there  were  still  some  recorded  at  ly^  to  1% 
per  cent.  One  of  the  latter  was  from  the  California  Building 
and  Loan  Society,  more  generally  known  as  Mooney  's  Bank. 

Some  of  the  loans  recorded  in  those  four  years  were  from 
$50,000  to  $90,000  and  one  for  $35,000  as  late  as  July  1867, 
was  at  2  per  cent  per  month. 

Beginning  with  1868  the  rate  named  was  so  much  per 
annum  instead  of  by  the  month,  as  nearly  all  of  the  notes  to 
secure  mortgages  previous  to  that  year. 

For  the  next  three  years  most  of  the  loaning  on  real  estate 
was  made  at  12  per  cent  per  annum,  though  there  were  some 
loans  in  that  interval  at  15,  18  and  24  per  cent. 

At  the  end  of  1871  there  were  ten  savings  banks  lending 
on  real  estate  in  San  Francisco  and  as  many  more  in  the 
interior.  This  competition  resulted  in  a  still  further  reduction 
in  the  rates  for  mortgage  loans  to  10  per  cent  per  annum  as 
the  rule. 

The  range  for  such  loans  from  1872  to  1877,  both  years 
inclusive,  was  8  to  15,  while  the  prevailing  rates  were  10  to  12. 
There  were  two  $100,000  loans  in  1871,  and  one  of  them  was 
at  11  per  cent. 

In  1878  and  1879  the  ruling  rate  was  9  per  cent,  with 
more  or  less  business  above  and  below  that  figure. 

In  the  next  three  years  the  rates  were  8  to  9  per  cent. 
In  the  last  of  these  three  years  there  was  a  loan  of  $630,000 
recorded  at  9  per  cent  to  a  well-known  capitalist  and  success- 
ful miner.    That  was  the  largest  loan  noted  up  to  that  time. 

Since  1883  comparatively  few  mortgage  loans  have  been 
recorded  in  San  Francisco  above  7  per  cent,  though  there  have 
been  some  at  8,  9  and  even  10  per  cent. 

But  the  more  general  rates  for  term  loans  on  that  class 
of  security  have  been  either  6  or  7  per  cent,  the  lenders  pay- 
ing the  mortgage  tax,  a  burden  that  was  put  upon  them  in 
the  State  Constitution  which  became  effective  in  1880. 


California  National  Bank,  Sacramento,  1882-1907 


Crocker  National  Bank,  San  Francisco,   1886 


Banking  in  California  l^l 

At  the  close  of  1890  the  German  Savings  and  Loan  Society 
recorded  a  mortgage  from  the  California  Sugar  Refinery  Com- 
pany for  a  loan  of  $250,000  at  7  per  cent.  In  the  same  month 
the  Hibernia  Savings  and  Loan  Society  put  out  $100,000  at 
7  per  cent.  Loans  of  $100,000  and  upwards  were  not  com- 
mon prior  to  the  present  century,  at  least  they  were  not  so 
common  as  they  since  have  been. 

In  the  foregoing  review  of  mortgage  records  in  San  Fran- 
cisco, in  many  cases  there  was  an  omission  of  the  rate.  One 
of  the  large  banks  seldom  named  the  rate  obtained  for  its 
loans,  and  took  deeds  rather  than  mortgages  as  security. 

As  a  rule  the  rates  for  commercial  loans  in  San  Francisco 
from  the  earliest  period  to  the  present  have  not  varied  much 
from  mortgage  loans  for  various  reasons  well  understood  by 
money  lenders,  but  even  in  this  class  of  loans  there  have  been 
notable  exceptions  to  the  general  rule. 

U.  S.  Mint  an  Auxiliary  of  Banks. 

There  has  always  been  a  close  and  intimate  relation  be- 
tween the  United  States  Mint  in  San  Francisco  and  the  banks 
of  the  State.  There  was  a  mint  before  there  were  any  incorpo- 
rated banks,  and  there  was  private  coinage  of  gold  under 
authority  before  there  was  Government  coinage. 

The  mint  in  San  Francisco  began  operations  in  April, 
1854,  and  the  coinage  output  for  the  last  eight  months  of  that 
year  was  $4,084,207,  an  average  of  about  $500,000  per  month. 
It  was  the  fifth  mint  established  in  the  United  States  and  was 
located  in  a  small  two-story  brick  building  on  the  north  line 
of  Commercial  street,  a  little  west  of  Montgomery.  The  plant 
was  in  keeping  with  the  size  of  the  building,  and  both  were 
entirely  inadequate  for  the  work  they  were  required  to  care 
for  and  which  they  did  try  to  meet  by  industrious  methods 
until  better  facilities  were  furnished  in  a  larger  and  well- 
constructed  building  on  Fifth  and  Mission  streets  in  1875. 

The  work  of  the  United  States  Mint  in  San  Francisco  has 
been  exceptionally  large  and  of  exceptionally  good  character. 


162  Banking  in  California 

No  mint  in  the  world  has  ever  been  better  located  in  reference 
to  the  proximity  of  its  supplies,  and  no  mint  in  the  world  has 
ever  made  a  better  annual  record  of  the  value  of  coinage 
output. 

The  best  work's  coinage  was  $105,829,019  in  1904,  of 
which  $103,168,500  was  in  gold,  $2,660,519  in  silver.  The 
largest  coinage  under  one  superintendent  was  that  reported  by- 
Frank  A.  Leach,  who  held  the  position  for  a  longer  period  than 
any  other  similar  official,  a  period  of  ten  years  and  two  months, 
when  he  resigned  to  accept  the  position  of  Director  of  the 
United  States  Mint. 

During  the  incumbency  of  Mr.  Leach  the  coinage 
amounted  to  $605,597,377,  of  which  $572,409,500  was  in  gold 
and  $32,187,877  in  silver.  There  was  also  coined  in  the  same 
interval  the  equivalent  of  40,893,616  in  silver  pesos  for  the 
Philippine  Islands  and  other  countries. 

The  total  coinage  of  this  mint  from  April,  1854,  to  July 
1,  1910,  a  period  of  56  years,  was  as  follows : 

American  gold  coin $1,606,052,407 

American  silver  coin 183,633,372 

American  one  cent  coins 49,960 

Total  to  July  1,  1910 $1,789,735,739 

First  pennies  ever  coined  in  San  Francisco  were  $3,190 
in  November  and  December,  1908.  In  1909  the  amount  was 
$26,180,  and  $29,370  for  first  half  of  1910. 

After  a  satisfactory  settlement  work  was  resumed  early 
in  July  in  the  execution  of  an  order  for  $300,000  in  half 
dollars.  Prior  to  filling  this  order  the  stock  of  subsidiary 
silver  coin  in  the  mint  was  unusually  small,  while  the  amount 
of  gold  coin  on  hand  was  about  $12,000,000. 

It  is  the  intention  hereafter  to  use  machines  for  doing 
the  work  hitherto  performed  by  women,  of  whom  some  thirty- 
five  have  been  on  the  pay-roll. 


Banking  in  California  1^3 

Mint  Officials. 

The  first  superintendent  of  the  mint  in  San  Francisco  was 
L.  A.  Birdsall,  who  assumed  the  office  in  June,  1853,  and 
retired  two  years  later. 

E.  Lott  took  charge  in  1855  and  was  followed  by  Robert 
J.  Stevens,  the  two  continuing  until  1857,  when  C.  H.  Hem- 
stead  took  charge,  holding  the  position  for  a  full  term  of  four 
years. 

Robert  A.  Swain,  a  prominent  merchant  of  the  city,  was 
superintendent  from  1861  to  1869,  or  for  two  full  terms. 

Gen.  0.  H.  La  Grange  took  charge  in  August,  1869,  retir- 
ing at  the  close  of  December,  1877. 

Henry  L.  Dodge,  a  leading  merchajat,  assumed  the  duties 
in  1878,  and  retired  on  June  30,  1882. 

E.  F.  Burton  folowed  and  remained  at  the  head  until 
July,  1885. 

Then  came  a  change  in  the  administration  at  Washington, 
and  Israel  Lawton  was  given  a  four-year  term  from  Atigust 
1,  1885,  to  the  same  date  in  1889. 

General  W.  H.  Diamond  of  a  well-known  mercantile  firm 
of  the  city,  was  in  charge  for  the  next  four  years. 

In  August,  1893,  John  Daggett,  a  mine  owner  in  Siskiyou 
county,  was  given  control  for  the  next  four  years.  This  ap- 
pointment was  considered  quite  appropriate,  as  it  was  the 
first  instance  where  a  producer  of  the  raw  material  became  a 
manufacturer  of  the  finished  product  in  the  shape  of  coin. 

Frank  A.  Leach,  a  newspaper  publisher  and  editor, 
became  superintendent  on  August  1,  1897,  and  voluntarily 
gave  up  the  position  at  the  close  of  September,  1907,  after  ten 
years  and  two  months  of  unusually  acceptable  service  to  those 
who  selected  him  for  the  work  as  well  as  to  the  general  public. 
He  did  much  to  improve  the  service  and  proved  his  efficiency 
under  the  most  trying  circumstances  incident  to  the  great 
public  disaster  in  1906. 

Judge  Edward  F.  Sweeney  of  Redding,  Shasta  County^ 
took  charge  of  the  mint  on  October  1,  1907,  and  has  so  far 


^^*  Banking  in  California 

proved  to  be  a  faithful  and  efficient  director  of  its  affairs. 
During  his  incumbency,  under  orders  from  Washington,  he 
removed  about  $300,000,000  in  gold  coin  with  perfect  safety 
from  the  vaults  to  the  Denver  Mint. 

The  Big  Fire  and  the  Mint. 

An  event  of  thrilling  interest  and  of  country-wide  impor- 
tance, in  connection  with  the  United  States  Mint  m  San  Fran- 
cisco, hung  in  the  balance  for  many  hours  during  the  great 
conflagration  of  April,  1906.  The  heavy  earthquake  in  the 
early  morning  hour,  by  upsetting  stoves  and  ranges  and  de- 
stroying connections  with  flues,  was  responsible  for  many  fires 
along  the  water-front.  The  cutting  off  of  the  usual  water 
supply  through  the  breaking  of  the  mains,  placed  all  property 
in  the  city  in  jeopardy. 

Though  a  long  distance  from  the  building,  first  attacked 
by  the  devouring  flames,  the  trend  was  west,  north  and  south, 
and  the  fire  was  soon  face  to  face  with  the  mint. 

The  heat  was  intense  at  Fifth  and  Mission  streets,  the 
mint  building  was  in  imminent  danger,  the  loss  involved  in 
its  possible  destruction  was  of  vast  importance,  not  only  to  San 
Francisco,  but  to  the  whole  country. 

In  no  other  one  building  on  the  coast,  and  perhaps  in  no 
other  one  building  in  the  country,  was  there  stored  at  that 
time  so  much  real  money,  the  vaults  in  the  structure  then  con- 
taining $300,000,000  in  gold  coin  and  bullion. 

Thus  far  up  Mission  street  to  the  west  and  through  Fifth 
street  north  and  south,  the  flames  found  no  obstacle  they  could 
not  subdue.  At  this  particular  corner  they  met  their  first 
deflection. 

It  was  a  happy  combination  of  circumstances  that  saved 
the  mint  building  on  that  eventful  day.  The  first  was  its  fire- 
proof character  and  its  solid  construction.  The  second  was 
the  distance  of  the  facade  from  the  street  with  the  prevail- 
ing wiud  as  a  further  protection.  The  third  was  the  artesian 
well  on  the  premises,  every  drop  of  water  in  which  at  that 
particular  juncture  was  worth  its  weight  in  gold.    The  fourth 


Banking  in  California  i^^ 

was  the  large,  well  handled  and  loyal  force  of  employees  and 
helpers  who  with  a  heroism  deserving  of  much  praise,  fought 
the  enemy  with  all  the  means  at  their  disposal,  and  discon- 
certed it  at  every  point  of  attack. 

This  was  the  combination  that  saved  the  valuable  struc- 
ture and  its  far  more  valuable  contents.  The  money  value  of 
what  was  inside  of  that  building  was  greater  than  the  value 
of  all  the  property  destroyed  by  fire  and  earthquake  in  the 
city  at  that  time. 

Mint  Vaults  Opened  to  Banks. 

The  saving  of  the  mint  building  meant  much  to  San 
Francisco,  to  the  State  and  the  Coast.  All  the  leading  banks 
had  been  burned  and  the  money  in  their  vaults  could  not  be 
reached  for  many  days  because  of  the  heated  debris  with 
which  they  had  been  covered.  There  was  very  little  money 
in  the  hands  of  the  people.  Those  residents  of  the  city  con- 
sidered to  be  the  most  wealthy  had  even  less  money  in  their 
pockets  or  within  reach  than  the  poorest  of  the  poor.  For 
several  days  all  classes  stood  together  in  the  bread  lines  of  the 
streets  and  shared  exactly  alike  in  the  common  supplies.  For 
once,  if  never  before  and  never  again,  the  rich  and  the  poor 
met  together  and  ate  together  in  the  open  air  and  on  the 
public  streets. 

The  United  States  Mint  never  before  had  such  an  oppor- 
tunity to  serve  a  stricken  people,  and  it  is  hoped  there  will 
never  be  another  similar  occasion  for  such  service. 

It  was  fortunate  for  poor  San  Francisco  at  that  time  to 
know  that  their  surface  conditions  were  not  their  real  con- 
ditions. It  was  true  they  had  no  money  in  their  possession 
and  much  of  their  real  estate  improvements  of  all  descriptions 
as  well  as  personal  property  had  been  turned  to  ashes. 

They  still  had  two  assets  left  that  an  earthquake  could 
not  shake  nor  a'  fire  destroy.  They  had  met  such  disasters 
before  and  had  conquered  them.  They  could  do  it  again,  and 
they  would. 


-^^^  Banking  in  California 

With  such  two  good  assets  as  credit  and  confidence,  they 
set  their  faces  to  the  front  with  flint-like  determination, 
trampling  over  the  heated  bricks,  stone  and  twisted  iron  and 
through  the  ash-covered  streets,  removing  debris  and  restoring 
order  out  of  chaos. 

The  -whole  country  looked  with  admiration  on  these  un- 
daunted toilers  on  the  shores  of  the  western  sea,  and  deep 
down  in  their  hearts  the  united  verdict  was — ''Success  to  you, 
for  you  deserve  it.'' 

They  did  more :  they  sent  material  help  of  all  kinds  and 
in  large  quantities  liberally  and  lovingly. 

The  Government  responded  quickly  and  nobly  in  all 
forms  of  relief.  The  local  mint  opened  its  doors  to  the  banks, 
and  opened  its  vaults  as  well  for  money  supplies  upon  accept- 
able securities. 

For  many  days,  through  a  temporary  union  of  the  leading 
banks,  the  whole  banking  business  of  the  city,  interrupted 
by  the  fire,  was  transacted  in  the  mint  building  so  miracu- 
lously preserved. 

For  that  splendid  service,  so  courteously  and  generously 
extended,  San  Francisco  has  ever  been  thankful.  It  was 
opportune,  essential  and  of  incalculable  value. 

Sub-Treasury  an  Important  Auxiliary. 

Another  important  auxiliary  of  the  California  banks  has 
been  the  Sub-Treasury.  This  agency  has  been  of  frequent  and 
great  service  to  all  the  banks  not  only  of  the  State  but  of  the 
entire  Coast. 

The  fiscal  business  of  the  Federal  Government  has  grown 
with  the  expansion  of  the  material  interests  of  the  country. 

After  two  experiments  of  conducting  a  Government  bank, 
both  of  which  proved  unsuccessful,  another  system  for  trans- 
acting the  financial  business  of  the  Government  was  proposed. 
This  was  in  1837.  Enough  votes  were  received  in  Congress  in 
1840  to  adopt  the  plan  that  had  been  under  discussion,  but 
at  the  very  next  session  the  act  was  repealed. 


Banking  in  California  167 

The  discussion  was  continued  and  resulted  in  1846  in  the 
adoption  of  the  system  which  is  essentially  the  one  now  in  use. 

The  headquarters  of  this  system  centers,  of  course,  in  the 
United  States  Treasury  in  Washington.  At  present  and  for 
many  years  nine  sub-treasuries  of  the  main  office  have  been 
serving  the  country,  located  as  follows :  New  York,  Philadel- 
phia, Boston,  Baltimore,  New  Orleans,  Cincinnati,  Chicago,  St. 
Louis  and  San  Francisco. 

The  Sub-Treasury  in  New  York  handles  more  money  than 
is  handled  at  the  main  office  in  Washington.  The  amount  of 
the  receipts  in  New  York  for  the  fiscal  year  of  1907-8  was 
$1,985,000,000  against  $1,773,000,000  at  the  general  office  in 
Washington.  Over  72  per  cent  of  the  total  receipts  for  that 
year  were  handled  in  these  two  offices. 

The  Sub-Treasury  at  Chicago  ranks  second  among  these 
agencies,  the  receipts  at  that  office  for  1907-8  being  $434,000,- 
000.  Philadelphia  generally  holds  third  position  and  Boston 
the  fourth. 

San  Francisco  and  St.  Louis  divide  honors  for  the  fifth 
position,  either  one  or  the  other  of  these  cities  leading. 

The  amount  of  gold  coin  receipts  in  the  above  fiscal  year 
was  $252,514,000  or  just  5  per  cent  of  all  kinds  of  money  rep- 
resented in  the  grand  total.  The  amount  of  gold  coin  received 
at  the  main  office  was  not  even  one-tenth  of  one  per  cent. 

New  York  received  the  largest  amount,  but  this  was  not 
over  4  per  cent  of  the  total.  It  is  only  as  one  goes  West  that 
gold  coin  is  more  frequently  seen.  In  the  same  year  the 
receipts  at  the  Sub-Treasury  at  Chicago  were  10  per  cent  of 
the  total  at  all  the  agencies.  The  receipts  at  San  Francisco 
were  nearly  as  large  as  in  New  York,  and  were  80  per  cent 
of  its  total  of  all  kinds  of  money  and  equal  to  one-third  of  all 
the  gold  coin  received  at  all  the  Government  offices  in  1907-8. 

Assistant  United  States  Treasurers. 

The  Government  was  very  prompt  in  supplying  San  Fran- 
cisco's  need  of  the  Sub-Treasury  service,  having  established 
the  same  here  in  1853.    Even  at  that  early  date  it  was  found 


168  Banking  in  California 

to  be  a  necessary  and  valuable  adjunct  to  the  public  conveni- 
ence as  well  as  to  the  Government,  and  at  no  subsequent 
period  has  its  presence  been  less  desirable.  In  fact,  it  has 
become  more  essential  as  the  years  have  gone  by. 

Jacob  D.  Synder  was  the  first  Assistant  United  States 
Treasurer  appointed  for  San  Francisco  and  he  was  in  control 
from  1853  to  1860,  both  years  inclusive.  L.  Hammond  was 
cashier  under  Mr.  Snyder  from  1853  to  1856  and  H.  A.  Palmer 
from  1857  to  1860. 

D.  W.  Cheeseman  succeeded  Mr.  Snyder  and  held  the 
office  until  1868.  F.  G.  Bornemann  became  cashier  on  March 
9,  1863,  and  remained  in  that  position  until  August  21,  1885. 

Charles  N.  Felton  succeeded  Mr.  Cheeseman  in  1869  and 
retired  in  1872.  He  was  followed  by  William  Sherman  from 
1873  to  1880.  N.  W.  Spaulding  succeeded,  retiring  at  the 
end  of  1884. 

In  1885  a  Democratic  administration  came  into  power  at 
Washington,  and  S.  H.  Brooks  was  appointed  Assistant  United 
States  Treasurer.  He  retained  Mr.  Bornemann  as  cashier  for 
a  few  months,  then  installed  Charles  G.  Ames.  This  choice 
not  proving  satisfactory  after  a  short  service,  Mr.  Bornemann 
was  recalled  for  temporary  service,  until  John  C.  Maynard 
was  given  the  position  in  1886.  He  resigned  in  1887,  when 
Mr.  Brooks  tendered  the  position  as  cashier  to  Thomas  P. 
Burns,  who  has  so  acceptably  filled  the  same  ever  since  that  it 
is  no  wonder  he  still  remains  in  charge. 

John  P.  Jackson  was  Assistant  United  States  Treasurer 
from  1890  to  1894,  and  C.  P.  Berry  held  the  position  for  the 
next  four  years. 

In  1898  Julius  Jacobs  was  given  the  appointment,  and  was 
reappointed  in  1902  and  again  in  1906,  and  served  until  his 
death  in  1907.  No  other  was  honored  with  a  second  reappoint- 
ment. 

William  C.  Ralston  became  Assistant  United  States  Treas- 
urer in  August  1,  1907,  and  is  still  in  charge. 


Banking  in  California  169 

There  have  been  ten  Assistant  United  States  Treasurers 
in  the  San  Francisco  office  and  six  cashiers ;  one  of  the  latter 
retained  the  position  for  23  years.  The  other  has  exceeded 
that  length  of  service,  and  he  appears  to  be  good  for  many 
more  years. 

Medium  of  Bank  Exchange. 

When  the  business  of  the  Mint  was  removed  from  Com- 
mercial street  to  Mission  and  Fifth  streets,  the  Sub-Treasury 
was  given  the  vacated  quarters  on  Commercial  street,  and  still 
occupy  the  same.  The  building  was  destroyed  in  the  fire  of 
1906  and  the  vaults  covered  with  tons  of  bricks  and  mortar. 
The  contents  of  the  vaults  were  not  injured,  as  was  ascertained 
upon  opening  them  some  weeks  later. 

The  vault  room  was  increased  from  time  to  time  as  needed, 
especially  after  the  resumption  of  silver  dollar  coinage  in 
1878.  The  vaults  have  contained  from  $30,000,000  and  up- 
wards right  along  for  many  years.  The  largest  amount  ever 
stored  in  the  same  was  $87,000,000  in  1892. 

It  was  in  August  of  that  year  that  a  special  train  was 
secured  and  $20,000,000  of  Government  gold  coin  was  trans- 
ferred from  San  Francisco  to  New  York  or  Washington  under 
a  special  guard.  It  is  believed  that  this  was  the  largest  single 
shipment  of  gold  coin  ever  made  on  that  long  route  of  3,000 
miles,  or  for  any  other  considerable  distance. 

The  Sub-Treasury  in  San  Francisco  has  performed  many 
services  for  the  banks  in  the  matter  of  transferring  gold  coin 
from  San  Francisco  to  New  York  and  from  New  York  to  San 
Francisco  through  the  medium  of  telegraphic  exchange. 

In  the  fiscal  year  of  1904-5  gold  deposits  of  a  value  of 
$31,083,000  were  made  in  San  Francisco  and  paid  for  in  tele- 
graphic exchange  on  New  York  and  in  the  following  fiscal 
year  $17,489,000  of  such  deposits  were  treated  in  the  same 
way. 

In  connection  with  the  disaster  of  1906  the  Sub-Treasury 
performed  valuable  service  to  the  banks  and  to  the  city  in 


^^^  Banking  in  California 

the  handling  of  relief  funds  and  in  the  accommodations  ex- 
tended to  the  banks  within  a  week  after  the  fire. 

About  $40,000,000  was  handled  at  that  time  and  on  that 
account.  In  the  money  panic  of  the  fall  of  1907,  further 
notable  service  was  performed  by  the  Sub- Treasury.  On  all 
these  occasions  and  in  all  these  ways  the  San  Francisco  banks 
were  not  the  only  beneficiaries.  Indirectly  at  least  the  whole 
State  as  well  as  the  whole  coast  shared  in  the  courtesies. 

In  January,  1910,  the  Sub-Treasury  became  a  member 
of  the  San  Francisco  Clearing  House  Association,  and  made 
its  first  clearing  on  the  18th  of  that  month.  Though  a  mem- 
ber it  assumes  no  responsibility  in  the  work  of  the  association. 
A  fine  site  at  Pine  and  Sansome  has  been  secured  for  the  Sub- 
Treasury  on  which  a  suitable  building  will  be  erected. 

California  Bankers  Association. 

This  association  was  organized  in  March,  1891,  at  Los 
Angeles,  with  Thomas  Brown  as  president  and  George  E. 
Stewart  as  secretary.  The  first  formal  meeting  was  held  at 
San  Francisco  in  the  following  October,  when  the  above  gen- 
tlemen presided,  and  with  an  enrollment  of  161  banks. 

The  next  meeting  was  also  held  in  San  Francisco  in  Sep- 
tember, 1892,  with  Isaias  W.  Hellman  as  president  and  170 
members. 

On  account  of  the  bank  panic  of  1893;  there  was  no  meet- 
ing held. 

At  the  third  anniversary  in  San  Francisco  in  February, 
1894,  Lovell  White  presided  and  R.  M.  Welch  served  as  secre- 
tary. Mr.  Welch  is  still  secretary,  having  been  elected  an- 
nually ever  since.  A  few  years  ago  the  association  gave  Mr. 
Welch  a  competent  assistant  in  the  person  of  F.  W.  Colburn, 
who  still  holds  that  position. 

The  next  meeting  was  held  at  Fresno  in  October,  1895, 
when  N.  D.  Rideout  was  elected  president.  There  was  no 
session  held  in  1896. 

In  1897,  the  meeting  was  held  at  Los  Angeles  and  in 
1898  in  San  Francisco,  with  John  J.  Valentine  as  president. 


Banking  in  California  171 

There  was  no  meeting  in  1899,  but  for  the  next  six  years, 
the  meetings  were  held  annually.  That  for  1900  was  at  Sacra- 
mento, with  C.  Altschul  as  president. 

The  next  two  meetings  were  held  at  San  Jose  in  1901 
and  1902,  with  J.  M.  Elliott  and  James  K.  Lynch  as  presidents. 
Mr.  Lynch  was  also  president  at  the  meeting  in  San  Francisco 
in  1903. 

In  1904,  the  meeting  was  held  at  Los  Angeles  with 
A.  H.  R.  Schmidt  as  president,  and  in  1905  at  Oakland  with 
I.  F.  Moulton  as  president. 

The  meeting  for  1906  was  cancelled  because  of  the  April 
disaster  of  fire  and  earthquake. 

The  last  four  annual  gatherings  of  the  association  were 
held  at  Santa  Barbara,  Pasadena,  Del  Monte  and  Riverside, 
while  the  presidents  chosen  at  these  respective  meetings  were 
George  W.  Peltier,  Joseph  D.  Bradford,  H.  S.  Fletcher  and 
William  H.  High. 

For  the  last  ten  years  there  has  been  a  steady  increase 
in  the  membership  until  it  now  reaches  521. 

J.  J.  Fagan  has  held  the  office  of  treasurer  for  several 
years,  succeeding  Gr.  W.  Kline. 

Relation  of  Banks  to  Industries. 

The  relation  of  banks  to  industrial  enterprises  is  a  ques- 
tion of  much  interest  and  serious  import,  but  it  is  not  a  new 
one.  Banks  have  had  to  deal  with  it  from  time  immemorial, 
and  it  will  probably  stay  with  them  to  the  end. 

Banks  are  trustees  not  only  of  the  capital  of  their  stock- 
holders, but  of  the  capital  of  their  depositors  to  the  extent 
that  the  same  has  been  entrusted  to  their  keeping. 

A  bank  has  no  more  right  to  jeopardise  its  capital  than 
it  has  to  jeopardise  its  deposits.  Depositors  regard  bank 
capital,  reserve  and  surplus  as  constituting  a  guarantee  fund 
of  deposit  accounts. 

If  this  capital  is  tied  up  by  the  bank  in  any  industry,  or 
any  considerable  proportion  of  it,  the  value  of  the  guaranty 


172  Banking  in  California 

will  depend  on  the  success  of  the  industry  in  which  it  has 
been  invested. 

Depositors  know  and  expect  that  the  banks  will  loan  out 
a  portion  of  their  money,  but  they  do  not  always  know  and 
probably  would  not  approve  of  any  investment  by  the  bank 
of  any  portion  of  such  deposits.  There  is  a  vast  diiference 
between  loans  and  investments,  as  every  one  knows. 

Bankers  are  not  merchants,  nor  manufacturers,  nor  real 
estate  operators,  nor  industrial  agents,  nor  promoters  of 
visionary  schemes  and  speculative  movements  of  any  kind. 

Of  course  there  have  been  bankers  who  have  taken  up 
some  of  these  side  issues  because  of  a  natural  tendency  in  that 
direction  or  because  they  were  unable  to  resist  the  temptation 
of  the  promised  quick  and  flattering  returns. 

Many  of  these  bankers  are  no  longer  in  the  banking  busi- 
ness, but  are  castaways  along  the  shores  of  time.  California 
has  had  some  of  that  sort,  and  the  memory  of  that  fact  on 
the  part  of  innocent  victims  has  been  both  painful  and  of 
long  duration. 

Such  cases  are  not  by  any  means  peculiar  to  this  State. 
They  are  to  be  found  in  every  State  that  has  been  in  existence 
for  any  number  of  years.  California  probably  has  as  clean  a 
record  in  that  particular  as  any  other. 

There  may  be  some  of  that  class  still  in  existence  here 
as  well  as  elsewhere.  Recently  there  have  been  efforts  made 
to  improve  the  service  of  bank  examinations.  If  these  efforts 
prove  as  efficient  as  promised  and  as  many  have  been  led  to 
believe,  all  kinds  of  crooked  banking  will  be  more  difficult  to 
follow  than  heretofore. 

Of  course  banks  are  expected  to  favor  and  promote,  as  far 
as  it  is  within  their  power  and  scope  of  organization,  all 
kinds  of  legitimate  business  enterprises.  They  have  been 
formed  for  that  purpose,  and  the  people  have  a  right  to  look 
to  them  and  to  depend  upon  them  for  just  that  kind  of  service. 

But  the  responsibility  for  the  success  of  these  business 
projects  must  rest  upon  those  engaged  in  the  respective  pur- 
suits, and  not  upon  the  banks.     These  have  their  own  re- 


Banking  in  California  l^^ 

sponsibilities,  and  they  are  of  an  altogether  different  char- 
acter. 

There  have  been  cases  where  two  or  more  men  desirous 
of  promoting  some  business  scheme  far  beyond  their  financial 
ability  to  compass,  have  organized  a  bank  so  as  to  obtain  an 
increased  amount  of  capital  at  little  cost  to  carry  out  their 
plan. 

Banks  organized  along  such  lines  and  from  no  higher 
motives  are  not  what  the  people  want,  nor  the  kind  the  people 
should  patronize;  and  if  the  facts  can  be  proven  as  outlined, 
they  should  not  be  allowed  a  charter. 

Banks  that  lend  themselves  to  the  promotion  of  purely 
speculative  schemes,  such  as  the  cornering  of  food  or  other 
necessary  supplies,  are  operating  entirely  outside  the  pale  of 
good  and  sound  banking  business. 

Of  course  no  bank  will  admit  that  it  is  or  ever  has  been 
or  ever  will  be  found  in  that  category.  It  is  not  considered 
good  form,  and  no  banker  worthy  of  the  name  will  openly 
and  purposely  pursue  such  a  course,  or  any  course  that  he 
knows  will  mar  his  reputation  or  the  reputation  of  his  bank. 

Bankers  are  no  doubt  blamed  for  a  great  many  things 
of  which  they  are  entirely  innocent,  and  sometimes  praised 
and  honored  for  other  things  they  do  not  deserve. 

In  the  matter  of  making  loans  much  wisdom  is  required, 
even  when  the  applicant  has  the  confidence  of  the  lender  and 
the  security  offered  is  first  class.  How  far  can  a  banker  go 
when  two  factors  of  that  kind  are  behind  the  application  ? 

Is  the  lender  justified  in  compelling  an  applicant  for  a 
loan  to  disclose  just  what  disposition  he  proposes  to  make  of 
the  funds  ?  Should  he  not  be  content  with  satisfactory  assur- 
ance that  the  obligation  of  interest  and  repayment  will  be 
promptly  met  in  accordance  with  the  conditions  agreed  upon  ? 

In  reply  to  this  question,  disinterested  parties  will  answer 
in  the  affirmative. 


1''^  Banking  in  California 

Public  Money  in  Banks. 

Withdrawals  of  money  from  the  accustomed  channels  of 
circulation  are  to  be  deprecated  from  whatever  cause  they 
may  arise.  The  free  movement  of  money  is  desirable  from 
every  point  of  view. 

Until  quite  recently,  the  money  collected  in  payment  of 
taxes  was  withheld  from  circulation  until  disbursed  for 
salaries  and  supplies  in  regular  order  throughout  the  year. 

Some  years  ago,  in  order  to  minimize  this  evil,  taxes 
were  made  payable  in  semi-annual  installments,  the  first  in 
November  and  the  second  in  the  following  April,  with  the 
option  of  paying  the  whole  amount  in  November. 

This  arrangement  afforded  some  relief,  as  before  the 
second  withdrawal  occurred,  some  of  the  money  received  from 
the  first  installment  had  come  into  circulation  again. 

Later  on  it  was  determined  to  adopt  still  more  modern 
ways  of  dealing  with  this  matter,  by  following  the  example 
of  other  and  larger  states. 

In  1905,  the  legislature  passed  an  act  permitting  the 
State  to  deposit  money  in  the  banks  against  acceptable  security 
at  a  minimum  rate  of  2  per  cent  per  annum.  Constitutional 
objections  having  been  raised,  an  amendment  to  overcome  the 
same  was  voted  at  the  November  election  in  1906.  This  was 
ratified  in  1907,  when  additional  legislation  was  enacted  to 
put  it  in  force  and  at  the  same  time  to  enlarge  the  sphere 
so  as  to  make  it  apply  to  all  collectors  of  public  money. 

San  Francisco  had  something  m  its  charter  that  seemed 
to  stand  in  the  way  of  a  free  application  of  the  new  law,  and 
this  was  subsequently  removed  by  amendment. 

Upon  the  removal  of  these  legal  technicalities,  and  upon 
application  from  the  banks  for  the  use  of  public  money,  con- 
siderable amounts  of  money  from  the  State  and  county  vaults 
were  released  to  the  banks  upon  deposits  of  the  required 
securities. 

The  law  is  not  mandatory.  It  simply  permits  state,  county 
and  municipal  treasurers  to  honor  applications  of  this  sort 


Banking  in  California  175 

whenever  in  their  judgment  the  money  on  hand  is  in  excess 
of  current  needs  and  the  securities  offered  are  acceptable. 

Thus  far  the  new  law  has  worked  well.  The  money- 
market  has  been  relieved  of  the  former  annual  or  semi-annual 
stringency,  and  the  state,  county  and  municipal  governments 
have  received  considerable  income  from  the  use  of  their  idle 
money. 

Banks  in  the  State  desiring  the  use  of  such  public  money, 
and  that  are  willing  to  pay  2  jper  cent  per  annum  interest 
for  such  use  may  secure  the  same  by  making  an  application 
setting  forth  the  amount  of  paid-up  capital,  exclusive  of  re- 
serve and  surplus,  and  the  sum  of  the  deposit  needed  (which 
must  not  exceed  25  per  cent  of  the  paid-up  capital),  with  a 
description  of  the  bonds  offered  and  a  certified  copy  of  the 
authority  for  the  proceeding. 

These  deposits  are  subject  to  call  as  a  whole  or  in  part, 
but  the  banks  are  given  fair  warning  of  the  call. 

The  amount  of  money  formerly  locked  up  in  these  public 
vaults  has  gone  into  the  millions. 

The  cash  balances  in  the  State  Treasury  on  the  1st  and 
15th  of  the  month  in  1907  varied  from  $6,899,000  in  January 
to  $4,233,000  in  December,  the  average  for  the  whole  year 
being  nearly  $6,000,000. 

The  State  Treasurer  thinks  the  plan  can  be  still  further 
improved  by  the  introduction  of  the  check  system  against 
these  deposits.  This  would  obviate  the  requirement  of  keeping 
any  considerable  amount  of  money  on  hand  for  current  needs. 

It  would  also  save  the  unnecessary  handling  of  large 
sums  of  money,  and  the  further  large  expense  now  involved 
in  the  transportation  of  the  same  to  and  fro.  It  would  permit 
payments  to  be  made  direct  to  the  parties  to  whom  the  sums 
are  due  for  salaries  or  supplies. 

Every  county  treasurer  charged  with  the  collection  of 
State  taxes  must  now  make  at  least  two  journeys  to  Sacra- 
mento annually  with  the  money  due  the  State  Treasurer,  thus 
removing  it  temporarily  from  the  locality  where  collected. 


^'^^  Banking  in  California 

The  State  Treasurer  sees  no  reason  why  the  State  taxes 
collected  in  San  Francisco,  Los  Angeles,  Fresno,  Oakland,  San 
Jose  and  other  places  might  not  be  deposited  in  the  banks 
in  these  cities  subject  to  his  order. 

The  suggestion  appears  to  be  a  good  one,  and  legislation 
will  be  sought  to  make  it  effective. 

State  funds  alone  in  banks  in  the  last  fiscal  year  netted 
over  $250,000  in  interest  to  the  State  Treasury. 

Big  Gains  in  California  National  Banks. 

National  banks  have  multiplied  rapidly  in  California  in 
the  last  few  years.  In  the  first  nine  years  of  the  present  cen- 
tury there  has  been  a  gain  of  300  per  cent  in  these  associa- 
tions in  the  State. 

There  is  hardly  another  State  that  can  show  such  a  gain 
or  any  approximation  to  it  for  the  same  interval.  The  system 
has  been  in  operation  here  for  nearly  forty  years,  but  the 
yearly  increase  was  quite  moderate  during  the  first  thirty 
years. 

The  gain  in  Oregon  from  1900  to  1909  was  about  170  per 
cent ;  in  Washington  140  per  cent ;  in  Utah  100  per  cent. 

There  was  a  national  bank  in  Nevada  five  years  before 
there  was  one  in  California,  but  it  went  out  three  years  later, 
and  it  was  in  1880  before  there  was  another.  There  was 
never  at  any  time  more  than  two  in  operation  there  until 
1905,  when  four  were  reported,  while  in  1909  there  were 
twelve.  The  large  increase  in  those  four  years  was  due  to 
the  discovery  of  new  deposits  of  ore. 

Idaho  had  a  national  bank  four  years  before  California, 
but  it  got  along  with  that  one  bank  for  fifteen  years.  In 
the  first  nine  years  of  the  present  century  the  number  was 
increased  from  9  to  45,  a  gain  of  400  per  cent. 

On  the  1st  September,  1909,  the  San  Francisco  National 
banks  reported  their  loans  and  discounts  at  $67,717,000,  of 
which  42  per  cent  was  on  demand  paper  with  one  or  more 
individual  or  firm  names  and  35  per  cent  on  demand  secured 


Security  Savings  Bank,  Los  Angeles,  1889 


The  Mercantile   Trust   Company   of   San   Francisco, 
The  Mercantile   National   Bank,    1910 


1899 


Banking  in  California  177 

by  stocks,  bonds  and  other  personal  securities.  On  the  same 
date  the  Los  Angeles  banks  had  $33,713,000  in  loans  and 
discounts,  of  which  48  per  cent  was  in  the  first  class  and 
23  per  cent  in  the  second  class.  On  the  same  date  the  national 
banks  in  California  outside  of  those  two  cities  had  $57,331,000 
in  loans  and  discounts,  of  which  over  50  per  cent  was  in  the 
first  class  and  nearly  22  per  cent  in  the  second  class. 

San  Francisco  has  about  reached  a  point  in  the  national 
bank  system  when  it  should  be  classed  as  a  central  reserve 
city.  The  only  cities  in  that  list  are  New  York,  Chicago  and 
St.  Louis.  San  Francisco  has  eleven  national  banks  and 
$101,000,000  in  loans  and  discounts,  against  ten  national 
banks  in  St.  Louis  and  $118,000,000  in  loans  and  discounts. 

Protection  for  Depositors. 

California  bankers  have  not  yet  seen  their  way  to  follow 
Oklahoma  and  Kansas  in  the  adoption  or  even  recommenda- 
tion of  legislation  for  the  creation  of  an  insurance  fund  to 
guarantee  deposits  in  high  pressure  banks,  and  from  present 
appearances  they  never  will  while  they  have  their  senses. 

The  legislature  of  Oklahoma  probably  thought  it  was 
doing  a  wise  and  praiseworthy  thing  when  it  enacted  that 
sort  of  legislation.  No  doubt  they  thought  it  was  something 
new  under  the  sun,  which  would  forever  redound  to  their 
credit. 

An  insurance  fund  created  by  banks  to  guarantee  the 
payment  of  deposits  in  failed  banks  where  the  assets  were 
insufficient  for  that  purpose  is  not  a  new  thing.  It  was  tried 
in  New  York  many  years  ago  and  was  a  dismal  failure,  even 
as  the  result  of  a  short  trial. 

The  system  is  fundamentally  weak  and  unjust  as  well. 
It  is  simply  an  outrage  to  thrust  such  a  burden  upon  a  private 
bank  system,  and  no  State  system  should  stand  for  it  a  single 
hour. 

To  tax  a  well  and  honestly  conducted  bank  for  the  failure 
of  another  not  so  conservatively  managed,  over  which  it  has 


178  Banking  in  California 

no  supervisory  control,  is  an  insult  to  common  sense  and 
common  decency. 

Such  a  system  can  never  become  permanent  under  the 
independent  bank  system,  and  legislatures  can  make  better 
use  of  their  time  than  to  attempt  to  enact  any  legislation 
along  that  line. 

Banking  under  the  most  favorable  circumstances  is  suffi- 
ciently hazardous  without  the  introduction  of  any  new  ele- 
ments of  that  character. 

To  make  an  orderly  conducted  bank  under  competent 
management  in  any  way  responsible  for  another  not  so  well 
cared  for  is  to  encourage  incompetency,  recklessness  and  every 
other  bad  element  that  might  be  named,  and  ultimately  to 
undermine  the  whole  system  by  destroying  confidence,  which 
in  the  end  would  result  in  general  business  demoralization. 

Postal  Savings  Banks. 

Postal  savings  banks  have  not  many  strong  advocates 
among  the  banking  fraternity  of  California,  nor  for  that 
matter  in  any  other  State,  so  far  as  has  been  observed. 

In  at  least  two  of  the  conventions  of  the  California 
Bankers'  Associations,  namely,  in  1909  and  1910,  addresses 
were  made  in  disapproval  of  the  system  by  notable  representa- 
tives of  the  savings  and  commercial  banks. 

The  United  States  Congress  has  given  more  or  less  con- 
sideration to  this  proposition  at  several  sessions,  particularly 
during  that  of  1909-10.  The  scheme  has  encountered  much 
opposition,  showing  that  the  people  as  represented  in  that 
body  have  not  been  at  all  unanimous  as  to  its  merits. 

The  opposition  of  some  bankers  to  the  system  has  been 
seized  as  an  argument  in  its  favor  by  the  proponents  on  the 
ground  that  what  the  bankers  oppose  the  people  should 
approve. 

Of  course,  this  is  a  silly  argument,  even  if  the  people 
who  advance  it  are  not  also  silly. 


Banking  in  California  179 

It  is  about  time  that  the  idea  of  bankers  being  at  cross- 
purposes  with  the  welfare  of  the  people  were  eradicated.  It 
must  be  patent  to  the  most  casual  observers  that  bankers 
prosper  only  as  the  people  prosper.  In  this  prosperous  coun- 
try there  are  more  people  indirectly  engaged  in  banking  than 
those  directly  engaged. 

Many  people  are  conscientiously  opposed  to  postal  savings 
banks  purely  on  the  ground  that  they  are  opposed  to  Gov- 
ernmental management  of  any  form  of  business  that  can  be 
better  and  more  economically  managed  by  private  enterprise. 

Government  has  its  functions  and  it  serves  the  people 
best  when  it  rigidly  attends  to  its  own  affairs,  that  of  uphold- 
ing wholesome  laws  and  maintaining  a  square  deal  for  its 
subjects,  one  and  all,  high  and  low,  rich  and  poor. 

The  bankers  have  nothing  to  fear  from  postal  banks  as 
contemplated  in  the  proposed  legislation.  On  the  contrary, 
it  is  possible  that  the  results  will  be  quite  beneficial  to  the 
banks  and  to  the  people  as  well  in  the  utilization  of  a  larger 
money  force  and  in  the  higher  grade  of  citizenship  which 
frugal  habits  will  create  and  maintain. 

Postal  savings  banks  won  out  in  Congress  on  June  22, 
1910. 

Central  Bank — Currency  Problem. 

Since  January,  1879,  the  monetary  system  of  the  country 
has  been  on  a  specie  basis,  and  since  the  Congressional  action 
of  1900  all  forms  of  paper  money  have  been  maintained  on  a 
par  with  the  gold  standard. 

So  far  this  course  has  been  generally  satisfactory  to  all 
concerned. 

There  are  some  things  yet  lacking  to  make  the  system 
an  ideal  one. 

One  of  these  is  uniformity  in  the  character  of  the  paper 
money  issues.  Instead  of  five  kinds,  as  now,  there  should 
be  only  one. 


180  Banking  in  California 

Another  is  a  greater  degree  of  elasticity  to  cover  special 
needs  for  an  increase  in  the  volume  without  jeopardizing  the 
value. 

The  proportion  of  credit  money  must  not  get  beyond 
its  proper  relation  to  the  stock  of  primary  money. 

Since  January  31,  1900,  to  June  1,  1910,  the  stock  of  all 
kinds  of  money  in  the  United  States,  according  to  official 
statements,  shows  an  increase  of  51  per  cent. 

In  the  same  interval  the  stock  of  hard  money  was 
increased  49  per  cent ;  that  of  paper  money,  exclusive  of  coin 
certificates,  56  per  cent ;  that  of  coin  certificates  115  per  cent, 
and  that  of  national  bank  notes  188  per  cent.  Treasury  notes 
show  a  reduction  oi  95  per  cent. 

The  volume  of  greenbacks  was  fixed  by  law  in  May,  1878, 
and  has  not  since  been  changed. 

If  the  volume  of  credit  money  was  up  to  its  full  limit  in 
relation  to  primary  money  a  decade  ago,  it  is  considerably 
beyond  that  limit  now. 

The  coin  certificates  are  amply  protected  dollar  for  dollar 
in  the  kind  of  metallic  money  they  call  for. 

A  reserve  of  $150,000,000  in  gold  coin  is  held  for  the  re- 
demption of  the  greenbacks. 

Practically  this  is  equivalent  to  a  premium  of  $3,000,000 
to  $6,000,000  per  annum  which  the  Government  pays  for  the 
privilege  of  exercising  that  form  of  bank  business. 

Though  the  volume  of  these  notes  has  been  reported  at 
$346,681,000  for  over  thirty  years,  it  is  doubtful  if  the  actual 
total  in  existence  exceeds  $300,000,000.  A  2  per  cent  bond 
issue  of  that  amount  for  retiring  these  notes  would  create  an 
obligation  of  only  $6,000,000  per  annum,  while  if  the  bonds 
were  deposited  for  circulation  there  would  be  a  small  rebate 
in  taxes. 

If  this  course  were  pursued  the  $150,000,000  in  gold  now 
locked  up  would  be  released  and  thus  add  that  amount  to  the 
money  supply. 


Banking  in  California  1^1 

While  the  population  of  the  country  has  increased  16 
per  cent  in  the  past  decade,  the  per  capita  of  money  in  circu- 
lation shows  a  gain  of  nearly  24  per  cent. 

Whether  this  course  in  reference  to  the  greenbacks  is 
adopted  or  not  there  are  some  other  currency  matters  that 
should  receive  prompt  attention. 

For  some  years  to  come  instead  of  purchasing  fine  silver 
for  subsidiary  coinage,  standard  dollars  should  be  used  for 
that  purpose.  These  dollars  can  never  be  used  except  for 
domestic  circulation,  and  for  that  purpose  they  will  go  further 
than  in  their  present  form. 

Subsidiary  coin  should  have  the  right  of  way  for  small 
change  up  to  the  limit  of  five  dollars. 

This  would  make  room  for  $175,000,000  to  $200,000,000 
more  of  silver  coin  for  the  retail  trade,  and  if  coined  from 
standard  dollars  would  net  a  large  profit  to  the  Government. 

If  in  addition  to  these  changes  in  the  currency  system 
there  could  be  some  further  adjustment  of  the  banking  busi- 
ness through  the  creation  of  a  central  bank  under  the  joint 
control  and  direction  of  the  Government  and  bankers  selected 
for  that  service,  so  as  to  safely  and  adequately  provide  for 
the  variable  conditions  of  business,  financial  operations  would 
be  in  more  perfect  accord  with  the  wants  of  the  people. 

This  matter  of  a  central  bank  or  some  agency  answering 
to  that  idea  will  probably  be  taken  up  at  the  next  session  of 
Congress,  when  the  Special  Monetary  Commission  created  by 
that  body  to  investigate  the  subject  is  expected  to  make  its 
report. 

In  the  meantime  it  will  be  well  for  those  having  practical 
views  on  the  subject  to  make  them  public  to  the  end  that  the 
people  may  be  educated  along  the  line  of  the  best  system  that 
may  be  proposed. 

Banks  With  Small  and  Large  Capital. 

On  the  15th  June,  1910,  there  were  443  banks  in  Cali- 
fornia under  the  jurisdiction  of  the  Superintendent  of  Banks 


182  Banking  in  California 

having  capital  stock  of  $25,000  and  upwards,  and  one  under 
the  mutual  system  with  a  reserve  of  $3,500,000. 

Of  this  number  177,  or  40  per  cent  of  the  total,  reported 
a  capital  of  $25,000  each,  the  minimum  amount  allowed  to  do 
a  banking  business  as  a  joint  stock  bank  in  this  State. 

There  were  72  others  with  a  capital  stock  of  $50,000  each, 
15  with  $30,000  and  5  with  $40,000. 

Twenty  others  had  capitals  varying  from  $60,000  to 
$80,000  and  53  with  $100,000  each. 

Seventeen  had  from  $125,000  to  $175,000  and  18  with 
$200,000  each. 

Thirty-six  had  capitals  of  over  $200,000  but  less  than 
$500,000,  including  11  of  $250,000  each. 

Six  had  capitals  of  $500,000  and  nine  with  capitals  of 
$600,000  to  $850,000. 

Seven  had  capitals  of  $1,000,000  each,  one  of  $1,200,000, 
two  of  $1,500,000  each,  one  of  $3,250,000  and  three  branches 
of  foreign  incorporated  banks  having  still  larger  capitals. 

Of  the  182  national  banks  in  operation  in  California  on 
the  same  date,  56  had  the  minimum  capital  of  $25,000,  two 
of  $30,000,  two  of  $40,000,  thirty  of  $50,000,  two  of  $60,000, 
two  of  $75,000,  forty-one  of  $100,000,  seven  of  $150,000,  thir- 
teen of  $200,000,  five  of  $250,000,  four  of  $300,000,  five  of 
$500,000,  seven  of  $1,000,000,  one  of  $1,250,000,  one  of 
$1,500,000,  one  of  $3,000,000,  two  of  $4,000,000  each  and  one 
of  $6,000,000.  The  last  named  is  the  Wells  Fargo  Nevada 
National.  The  Bank  of  California  National  Association  has 
increased  its  capital  to  $8,500,000. 

Between  January  1,  1900,  and  June  15,  1910,  there  were 
305  banks  incorporated  in  California,  of  which  96  were  sav- 
ings and  209  commercial  banks  and  trust  companies. 

As  there  were  only  444  banks  (exclusive  of  branches)  in 
operation  on  the  last  named  date,  it  will  be  seen  that  most  of 
the  banks  now  in  existence  are  of  the  twentieth  century  class. 
This  applies  to  the  nationals  as  well  as  to  the  State  banks, 
and  the  general  condition  of  all  is  considered  to  be  good. 


Banking  in  California  183 

Significant  Bank  Mergers. 

The  closing  year  of  this  review  of  banking  in  California 
has  been  characterized  by  at  least  three  mergers  of  much  sig- 
nificance and  considerable  importance. 

The  first  of  these  was  the  reorganization  in  one  bank 
of  the  two  largest  branches  of  London  incorporations  which 
had  their  inception  in  two  of  the  leading  pioneer  private 
banks  of  the  city. 

Eesidents  of  San  Francisco  in  the  early  seventies  will 
readily  recall  the  private  banks  of  the  Seligmans  and  the 
Lazard  Freres. 

It  was  in  1873  that  the  business  of  the  former  was  incorpo- 
rated in  London  under  the  name  of  the  Anglo-Californian 
Bank,  Limited,  with  a  paid-up  capital  of  £300,300,  and  it 
was  in  January,  1884,  that  the  latter  was  incorporated  by 
royal  charter  in  England,  under  the  name  of  the  London, 
Paris  and  American  Bank,  Limited,  with  a  paid-up  capital  of 
$2,000,000. 

Both  of  these  banks  were  organized  for  business  in  San 
Francisco  and  both  were  quite  successful  in  their  under- 
takings, the  business  of  both  expanding  from  year  to  year. 

It  was  in  the  early  part  of  1908  that  the  latter  went  under 
the  national  system  and  within  the  next  twelve  months  the 
former  followed,  and  then  both  became  one  under  the  name 
of  the  Anglo  and  London  Paris  National,  with  a  capital  of 
$4,000,000,  all  paid  up,  and  surplus  and  undivided  profits  of 
$1,600,000.  The  bank  took  possession  of  its  elegant  new  build- 
ing on  the  northwest  corner  of  Sansome  and  Sutter  in  April, 
1910. 

The  second  merger  was  the  absorption  by  The  Bank  of 
California  National  Association  of  the  San  Francisco  National 
Bank.  The  former  is  the  successor  of  the  oldest  incorporated 
State  bank  of  the  same  name  in  existence,  and  previous  to 
this  acquisition  the  largest  commercial  bank  on  the  Pacific 
Coast.  The  San  Francisco  National  Bank  is  the  direct  legatee 
of  the  oldest  private  bank  of  San  Francisco,  first  known  as 


184  J^anking  in  California 

that  of  Drexel,  Sather  &  Church,  then  Sather  &  Church,  then 
Sather  &  Co,  then  followed  in  an  incorporated  form  as  the 
Sather  Banking  Company,  subsequently  nationalized  as  the 
San  Francisco  National  Bank.  James  K.  Wilson  and  C.  K. 
Mcintosh  of  the  bank  go  to  the  Wells  Fargo  and  Bank  of 
California,  respectively. 

By  this  acquisition  The  Bank  of  California  National 
Association  secures  a  good  line  of  business  represented  by 
resources  over  $5,000,000,  and  thus  places  itself  on  a  still 
higher  plane  in  the  financial  world. 

The  third  merger  event  is  the  union  of  the  Savings  and 
Loan  Society  and  the  San  Francisco  Savings  Union  under  the 
name  of  the  Savings  Union  Bank  of  San  Francisco.  The 
Savings  and  Loan  Society  has  had  a  continuous  and  honorable 
existence  of  fifty-three  years,  which  exceeds  that  of  any  other 
bank  of  the  same  character  in  any  of  the  Pacific  States. 

The  San  Francisco  Savings  Union  is  only  five  years  its 
junior.  The  union  of  these  two  pioneer  savings  banks  will 
give  San  Francisco  three  of  the  largest  of  that  character  this 
side  of  Chicago.  The  Savings  Union  Bank  will  have  a  paid-up 
capital  of  $1,500,000  and  a  surplus  of  $2,000,000,  with  a 
deposit  line  of  about  $30,000,000. 

Two  of  the  pioneer  commercial  banks  of  Petaluma  have 
declared  for  union.  These  are  the  Bank  of  Sonoma  County 
and  the  Petaluma  Savings  Bank.  The  former  has  a  capital 
of  $300,000,^  which  will  be  increased  to  $400,000  by  capitalizing 
$100,000  of*  its  surplus.  The  latter  has  a  capital  of  $100,000 
and  a  good  surplus.  The  former  will  be  nationalized,  while 
the  latter  will  be  maintained  under  its  present  name  as  an 
auxiliary. 

Tenure  of  Bank  Officials. 

Some  of  the  older  banks  of  the  State  have  retained  mem- 
bers of  their  force  for  many  years.  Mention  has  been  made 
of  those  connected  with  the  first  incorporated  savings  bank. 

The  Bank  of  California,  being  the  oldest  incorporated 
commercial  bank,  presents  many  of  this  character.    A  partial 


Banking  in  California  185 

list  of  these  is  as  follows :    William  Alvord,  vice-president  in 
1875,  president  in  1878  and  until  his  death  in  1905. 

Thomas  Brown,  assistant  cashier  in  1866,  cashier  in  1873 
and  until  his  death  in  1904. 

Sam  H.  Daniels  has  been  connected  with  the  bank  for 
41  years  and  for  several  years  as  assistant  cashier. 

I.  F.  Moulton  has  been  connected  with  the  bank  for  29 
years,  and  for  several  years  as  cashier,  and  for  the  past  year 
cashier  and  vice-president. 

Arthur  L.  Black,  assistant  cashier  for  the  past  five  years, 
was  for  30  years  in  a  bank  absorbed  by  the  Bank  of  California. 

Allen  M.  Clay  and  J.  D.  Euggles  have  been  connected 
with  the  bank  for  over  25  years,  and  for  several  years  have 
been  serving  as  secretary  and  assistant  secretary. 

James  Eolph,  note  teller,  reported  a  connection  of  42 
years  with  the  bank  on  the  1st  July,  1910. 

John  G.  Clark  voluntarily  retired  from  a  prominent  posi- 
tion in  the  bank  in  1906  after  a  creditable  service  of  50  years. 

Lovell  White  died  in  1910  as  president  of  the  San  Fran- 
cisco Savings  Union,  with  which  he  had  been  connected  since 
1862. 

I.  W.  Hellman,  president  of  the  Wells  Fargo  Nevada  Na- 
tional, Union  Trust  Company  and  Columbus  Savings  of  San 
Francisco  and  Farmers  and  Merchants  National  of  Los  Ange- 
les, has  been  in  the  banking  business  since  1868. 

George  Tourney,  for  many  years  the  efficient  secretary 
of  the  German  Savings  and  Loan  Society  of  San  Francisco, 
was  made  manager  and  vice-president  in  1910,  a  well-deserved 
honor. 

C.  F.  Dillman,  president  of  the  National  Bank  of  D.  O. 
Mills  &  Co.  of  Sacramento,  has  been  with  that  bank  for  34 
years. 

Safe  Deposit  Vaults. 

The  California  Safe  Deposit  Company  was  the  first  to 
establish  a  plant  on  a  large  and  modern  scale  in  San  Fran- 


1^^  Banking  in  California 

Cisco  for  the  storage  and  safe-keeping  of  bonds,  stocks,  legal 
papers  and  valuables  of  all  kinds. 

For  this  purpose  a  fireproof  building  of  four  stories  and 
a  high  and  well  lighted  basement  was  erected  on  the  southeast 
corner  of  Montgomery  and  California  street.  An  up-to-date 
safe  deposit  plant  was  established  in  the  basement  of  this 
building. 

This  plant  represented  7,000  boxes,  the  first  of  which  was 
rented  on  September  10,  1875. 

The  enterprise  supplied  a  long-felt  want,  relieving  many- 
congested  bank  and  private  vaults  that  had  been  pressed  into 
service  to  accommodate  patrons  and  friends.  The  business 
prospered  from  the  very  start,  and  in  1882  was  absorbed  by 
the  incorporation  in  that  year  of  the  California  Safe  Deposit 
and  Trust  Company.  Upon  the  failure  of  that  corporation 
the  business  of  the  safe  deposit  department  was  transferred 
to  the  Mercantile  Trust  Company. 

When  the  First  National  took  possession  of  its  new  build- 
ing at  Bush  and  Sansome  in  1889,  it  opened  a  fine  system  of 
safe  deposit  vaults  in  the  basement.  In  the  erection  of  the 
new  building  at  Montgomery  and  Post  streets,  special  atten- 
tion was  paid  to  this  feature  of  the  bank's  business,  in  the 
large  and  well-lighted  area  in  the  basement  devoted  to  that 
purpose  and  in  the  fire  and  burglar-proof  character  of  the 
plant. 

The  Union  Trust  Company,  incorporated  in  1893,  estab- 
lished a  similar  system  in  its  fine  building  on  the  northeast 
corner  of  Montgomery,  at  the  intersection  of  Post  and  Market. 
This  company  will  soon  be  located  in  its  new  building  on 
Market  and  Grant  avenue. 

The  Crocker  Safe  Deposit  vaults  in  the  Crocker  building 
at  the  gore  of  Market  and  Post  streets  are  up  to  date  in  every 
particular. 

The  Mercantile  Trust  Company  established  a  similar  plant 
in  the  basement  of  its  building  on  California  street. 


Banking  in  California  187 

Several  other  banks  in  San  Francisco  as  well  as  in  other 
parts  of  the  State  maintain  such  auxiliaries. 

The  value  of  these  plants  was  forcibly  illustrated  in  the 
big  fire  and  earthquake  of  April,  1906,  when  the  contents  of 
these  vaults  and  boxes  were  found  to  have  been  unharmed. 

Departmental  Banking. 

Up  to  July  1,  1909,  much  of  the  banking  in  California 
was  of  a  mixed  character.  That  kind  of  banking  was  all  cut 
out  by  the  new  banking  system  which  went  into  effect  on 
the  above  date. 

From  that  date  all  State  banks  that  desired  to  transact 
more  than  one  kind  of  banking  have  been  obliged  to  conduct 
each  department  separate  from  the  other. 

Under  the  new  law  every  bank  can  do  two  or  three  kinds 
of  banking  if  it  so  elects  and  is  willing  to  abide  by  the  pro- 
visions for  the  same. 

An  analysis  of  the  State  banks  at  the  close  of  June,  1910, 
shows  that  321  banks  are  confined  to  one  of  the  three  recog- 
nized classes  of  business.  Of  this  number  194  are  in  the  com- 
mercial class,  124  in  the  savings  class  and  3  in  the  trust  class. 

The  same  analysis  shows  170  in  the  departmental  bank- 
ing class,  of  which  155  are  in  the  commercial  and  savings 
class,  12  in  the  commercial,  savings  and  trust  class,  2  in  com- 
mercial and  trust  class  and  one  in  savings  and  trust  class. 

First  Year  Under  New  Bank  Law. 

In  tendering  his  resignation  at  the  end  of  the  first  year, 
Bank  Superintendent  Alden  Anderson  reported  491  banks  and 
branches  in  operation,  a  net  gain  of  5.  During  the  year  45 
banks  were  established,  13  State  banks  went  under  national 
system,  12  banks  were  closed  for  cause,  including  8  Japanese 
banks,  3  of  which  were  permitted  to  reopen,  and  15  were  lost 
in  mergers  or  by  voluntary  liquidation,  including  the  discon- 
tinuance of  several  branches. 

During  the  year  48  banks  were  required  to  repair  im- 
paired capital,  varying  from  10  to  70  per  cent,  with  one 


188  ,  Banking  in  California 

extreme  case  of  150  per  cent.  There  were  15  suits  filed  against 
the  unsound  banks,  and  18  suits  against  the  superintendent. 

One  receiver  took  charge  of  all  the  closed  banks,  thus 
minimizing  the  expense. 

One  of  the  closed  banks  was  the  State  Savings  and  Com- 
mercial, from  which  a  dividend  of  60  per  cent  would  have 
been  paid  to  creditors  if  the  superintendent  had  not  been 
restrained. 

Condition  All  California  Banks  June  30,  1910.    ^ 

Through  the  courtesy  of  the  Comptroller  of  the  Currency 
and  the  Superintendent  of  Banks  in  California,  the  writer  is 
permitted  to  add  a  summary  of  the  condition  of  all  the  banks 
in  California  on  June  30,  1910,  as  follows,  in  one  thousand- 
dollar  amounts : 

National  State  Total 

Capital,  etc .$  95,069  $  90,095  $185,164 

Investments   73,263  106,963  180,226 

Individual  Deposits 198,526  "      453,281  651,087 

Loans 211,068  351,332  562,400 

Resources   401,921  568,015  969,936 

These  are  the  aggregates  from  the  statements  of  185 
national  and  491  State  banks,  making  a  total  of  676  banks,  an 
increase  of  34  national  and  5  State  banks  during  the  fiscal 
year. 

The  above  totals  compare  as  follows  with  those  rendered 
at  the  close  of  June,  1909 : 

National           State  Total 

Capital,  etc $  60,043  $105,056  $165,099 

Investments 57,924           105,339  163,263 

Individual  Deposits 146,036           437,148  583,184 

Loans 148,373           337,867  486,240 

Resources   298,300           574,877  873,177 

The  grand  totals  show  a  gratifying  development  for  the 
year  along  all  the  lines  covered  by  the  summary.  The  better 
showing  of  the  nationals  is  due  to  the  conversion  of  a  number 
of  State  banks  to  that  system,  notably  the  Bank  of  California. 


Banking  in  California  189 

The  53  banks  in  San  Francisco  control  43  per  cent  of  the 
banking  capital  of  the  State,  41  per  cent  of  the  individual 
deposits  and  over  44  per  cent  of  the  total  banking  resources. 
Admitting  that  the  population  of  the  city  is  432,000  the 
resources  of  its  banks  are  equal  to  $1,000  per  capita. 

Income  From  Savings. 

Eight  of  the  San  Francisco  savings  banks,  organized  prior 
to  1890,  and  still  in  business  in  1910,  have  paid  dividends  to 
depositors  aggregating  the  following  amounts: 

Savings  and  Loan  since  1857 $17,411,116 

Hibernia  Savings  since  1859 51,274,486 

Savings  Union  since  1862 '. 30,961,546 

German  Savings  since  1868 36,546,769 

Humboldt  Savings  since  1869 3,074,500 

Security  Savings  since  1871 4,315,076 

French  Savings  since  1879 2,418,837 

Mutual  Savings  since  1889 3,500,000 

Total  eight  banks $149,502,330 

In  addition,  over  $10,000,000  was  paid  on  such  deposits 
by  the  four  banks  that  were  closed  in  1878  and  1879. 

Illustrations. 

Several  good  banking  friends  have  courteously  loaned 
cuts  of  the  buildings  in  which  they  are  doing  business,  to  be 
used  in  this  book. 

The  buildings  represented  are  :  The  Anglo  and  London 
Paris  National,  Bank  of  California  National  Association, 
Crocker  National,  First  National  and  First  Federal  Trust 
Company,  Mercantile  Trust  Company  and  Mercantile  Na- 
tional, Wells  Fargo  Nevada  National,  German  Savings  and 
Loan  Society,  Hibernia  Savings  and  Loan  Society,  Humboldt 
Savings  Bank,  Savings  Union  Bank  and  Security  Savings 
Bank,  all  of  San  Francisco;  First  National  Bank  and  First 
Trust  and  Savings  Bank  of  Oakland,  California  National  and 
National  Bank  of  D.  O.  Mills  &  Co.  of  Sacramento,  Security 
Savings  Bank  of  Los  Angeles,  and  the  United  States  Mint  in 


1^^  Banking  in  California 

San  Francisco,  used  by  the  Clearing  House  banks  for  some 
days  following  the  big  fire  of  1906. 

Five  of  the  San  Francisco  bank  buildings  are  creations 
since  the  fire  and  are  of  the  most  modern  type. 

The  D.  O.  Mills  bank  in  Sacramento  is  the  one  in  which 
Mr.  Mills  did  business  in  1852.  This  bank  has  had  a  con- 
tinuous existence  of  over  sixty  years. 

Bank  Act  of  1909. 

The  enacting  clause  of  the  Bank  Act  is  ' '  An  act  to  define 
and  regulate  the  business  of  banking." 

Some  of  the  more  salient  points  of  this  latest  bank  legis- 
lation in  and  for  California  may  be  briefly  pointed  out  for 
the  consideration  of  parties  interested  in  the  same. 

In  its  general  scope  the  act  provides  for  departmental  as 
well  as  separate  banking,  and  for  a  bank  superintendent 
clothed  with  ample  authority  to  enforce  its  provisions  and 
adequate  penalties  for  violations. 

The  act  is  composed  of  five  articles  or  grand  divisions. 
The  first  of  these  covers  the  general  provisions  relating  to 
banking,  the  next  three  to  savings  banks,  commercial  banks 
and  trust  companies,  and  the  last  to  the  office  and  duties  of 
the  Superintendent  of  Banks  as  the  head  of  the  State  Banking 
Department. 

Article  I  is  divided  into  51  sections.  The  definition  of  a 
bank  is  the  business  of  receiving  money  on  deposit,  and  this 
may  be  done  by  individuals  or  corporations  under  the  desig- 
nations of  savings  and  commercial  banks  or  trust  companies. 

Corporations  may  be  formed  for  doing  business  in  any 
one  or  all  of  these  classes  under  the  laws  provided  for  the 
same.  The  general  features  relating  to  these  forms  of  bank- 
ing are  well  understood. 

Foreign  corporations  desiring  to  transact  a  banking  busi- 
ness in  the  State  must  submit  to  State  supervision. 

Corporations  applying  for  a  certificate  to  do  a  banking 


Banking  in  California  19 1 

business  must  file  a  certified  copy  of  its  articles  of  incorpora- 
tion with  the  Superintendent  of  Banks. 

No  bank  or  any  officer  or  director  thereof  can  establish 
a  branch  without  the  written  approval  of  the  Superintendent 
nor  without  a  paid-up  capital  of  $25,000  for  every  branch 
opened,  unless  the  capital  of  the  main  bank  is  sufficiently 
large  to  meet  the  obligations  required  of  it  and  the  branch 
or  branches  it  desires  to  maintain. 

No  person  can  be  a  director  unless  he  is  the  owner  in  his 
own  name  of  stock  of  the  market  value  of  $500,  which  he 
cannot  sell,  hypothecate  or  pledge  as  security  for  any  loan 
or  debt,  without  the  forfeiture  of  his  position. 

No  person  not  authorized  by  the  Superintendent  can 
resort  to  any  subterfuge  by  sign  or  printed  matter,  to  solicit 
deposits  or  to  transact  any  feature  of  banking  business. 

Authorized  or  subscribed  capital  cannot  be  published  in 
any  form  unless  there  goes  with  such  announcement  the 
amount  of  capital  actually  paid  up. 

Within  fifteen  days  of  the  beginning  of  every  odd  num- 
bered year  all  deposits  that  have  been  undisturbed  for  the 
ten  preceding  years,  either  from  the  known  death  of  the 
depositor  or  other  cause,  must  be  published. 

Satisfactory  provisions  are  made  for  the  administration 
of  deposits  made  in  the  name  of  a  married  woman  or  minors, 
or  as  trustee  for  another,  in  the  case  of  death  or  other  cause, 
to  the  end  that  such  deposits  may  be  paid  to  the  persons 
entitled  to  the  same  and  the  bank  be  relieved  from  all  liability 
for  its  action. 

Banks  must  keep  an  accurate  and  accessible  list  of  its 
stockholders ;  also  a  list  of  the  stock  holdings  of  the  directors, 
with  all  changes  promptly  noted. 

The  paid-up  capital  and  surplus  must  at  all  times  be 
equal  to  10  per  cent  of  the  deposit  liabilities,  provided  that 
no  savings  bank  shall  be  required  to  have  a  capital  and  sur- 
plus in  excess  of  $1,000,000. 


1^2  Banking  in  California 

Every  bank,  except  savings,  must  at  all  times  have  a 
reserve  in  lawful  money  of  the  United  States  equal  to  15  per 
cent  of  its  deposits,  exclusive  of  public  deposits.  Three-fifths 
of  such  reserve  may  be  deposited,  subject  to  call,  with  any 
other  than  a  savings  bank.  Every  bank  receiving  deposits 
from  other  banks  must  have  a  lawful  reserve  of  20  per  cent. 

Failure  for  thirty  days  to  make  good  any  impairment  of 
these  reserves  will  subject  the  bank  to  insolvency  proceedings. 

Before  the  payment  of  dividends  to  stockholders  one- 
tenth  of  the  net  earnings  must  be  set  apart  as  a  reserve  fund 
until  such  accumulations  shall  be  equal  to  25  per  cent  of  the 
paid-up  capital.  Where  such  reserve  is  held  as  the  exclusive 
property  of  the  stockholders,  the  whole  or  any  part  thereof 
may  be  converted  into  paid-up  capital  stock,  and  a  new  reserve 
created  as  in  the  first  instance., 

Any  corporation  authorized  by  its  articles  so  to  do  may 
combine  either  one  or  both  of  the  other  classes. 

Departmental  banks,  whether  the  combination  is  savings 
and  trust,  commercial  and  trust,  or  savings,  commercial  and 
trust,  must  have  a  paid-up  capital  of  $225,000,  but  a  commer- 
cial and  savings  business  may  be  conducted  with  a  paid-up 
capital  of  $25,000. 

Consent  of  the  superintendent  and  a  fee  of  $50  are  neces- 
sary to  open  any  additional  department. 

Each  department  must  be  conducted  separately  from  the 
others  in  all  respects  and  along  all  lines,  as  though  each  were 
an  independent  bank  and  subject  to  all  the  rules  applying 
thereto. 

Existing  corporations  having  no  capital  stock  may  elect 
to  have  a  capital  stock  under  certain  conditions. 

Banks  conducting  a  safe  deposit  business  may  not  invest 
more  than  one-tenth  of  capital  and  surplus  in  such  plant. 

Any  bank  may  sell  the  whole  or  any  portion  of  its  assets 
to  another  bank,  with  the  consent  of  two-thirds  of  the  stock- 
holders in  both  the  buying  and  selling  banks. 

No  officer  or  employee  of  any  bank  shall  directly  or 


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Banking  in  California  193 

indirectly  borrow  any  of  the  deposits  or  funds  of  the  bank, 
nor  become  an  indorser  or  surety  for  loans  to  others,  nor  in 
any  manner  be  obligor  for  moneys  borrowed  or  loaned  by 
such  bank,  on  pain  of  having  his  position  declared  vacant 
and  a  misdemeanor  charge  placed  against  him. 

No  bank  shall  invest  its  own  capital  or  deposits  in  its  own 
capital  stock,  nor  make  any  loans  from  such  sources  on  its 
stock,  unless  necessary  to  prevent  losses  on  debts  previously 
contracted  in  good  faith. 

It  is  to  be  deemed  a  felony  for  bank  officials,  employees 
or  controlling  stockholder  to  sell  or  transfer  to  the  bank  with 
which  he  is  connected  any  mortgage  or  real  estate  in  which 
he  is  personally  or  financially  interested  without  the  consent 
of  the  superintendent. 

Banks  receiving  deposits  of  money  cannot  purchase,  un- 
derwrite or  guarantee  any  bond  issue  in  excess  of  5  per  cent 
of  its  assets,  except  bonds  of  the  United  States  and  California. 

Banks  cannot  invest  their  capital  or  the  money  of  depos- 
itors in  shares  of  corporations,  unless  necessary  to  prevent 
loss,  without  the  consent  of  the  superintendent. 

All  doctoring  of  bank  accounts  or  statements  by  a  director, 
officer,  agent  or  employee  is  deemed  to  be  a  felony. 

Any  officer,  director,  agent,  teller,  clerk  or  employee  who 
knowingly  overdraws  his  account,  or  agrees  to  receive  any 
gratuity  for  endeavoring  to  procure  for  any  person  any 
special  favor  or  concession  of  any  character,  shall  be  deemed 
guilty  of  a  felony. 

Any  agreement  with  depositors  to  waive  the  personal 
liability  of  stockholders  shall  be  void. 

No  bank  can  deposit  funds  with  a  bank  that  has  not 
been  designated  a  depository  by  a  vote  of  the  directors. 

No  bank  shall  make  a  loan  secured  by  the  stock  of 
another  bank,  if  such  loan  so  secured  exceeds  10  per  cent 
of  the  capital  stock  of  the  other  bank,  nor  can  it  make  a  loan 
against  such  collateral  unless  the  bank  has  been  in  existence 
two  years  and  has  earned  and  paid  a  dividend  on  its  capital 
stock. 


1^^  Banking  in  California 

Unpaid  interest  on  debts  owing  the  bank  cannot  be  re- 
garded as  profits  in  making  allowance  for  dividends. 

No  bank  shall  invest  or  loan  more  than  5  per  cent  of  its 
assets  in  any  one  bond  issue,  except  United  States  bonds  and 
bonds  of  California. 

Loans  on  real  estate  must  be  first  liens,  but  a  second 
mortgage  may  be  accepted  to  prevent  loss. 

National  banks  receiving  deposits  from  State  banks 
must,  at  the  request  of  the  superintendent,  submit  to  examina- 
tion, if  he  deem  it  necessary  or  desirable,  and  the  expense  of 
such  examination  must  be  borne  by  the  bank  examined.  In 
case  of  refusal,  the  superintendent  shall  notify  State  banks 
making  deposits  with  such  national  banks  to  withdraw  the 
same,  or  be  declared  guilty  of  a  misdemeanor. 

Commercial  banks  or  trust  companies  must  not  in  any 
way  solicit  savings  deposits,  unless  willing  to  create  and  main- 
tain a  special  department  for  savings,  for  which  they  must 
obtain  the  consent  of  the  superintendent. 

Every  bank  must  post  in  a  conspicuous  place  its  last 
certificate  from  the  superintendent  for  the  transaction  of 
business. 

The  last  section  under  Article  I  applying  to  general 
provisions  makes  ample  and  specific  provisions  for  the  deposit 
of  moneys  belonging  to  estates.  Under  the  order  of  the  court, 
these  moneys  may  be  deposited  in  any  bank  organized  under 
the  laws  of  the  State  of  California,  and  when  so  deposited 
and  while  in  possession  of  such  bank,  the  trustee  is  relieved 
and  discharged  from  all  liability  and  responsibility  therefor, 
and  the  bond  required  of  him  as  such  trustee  may  be  reduced 
to  such  an  amount  as  deemed  reasonable. 

As  Applied  to  Savings  Banks. 

Article  II  relates  to  provisions  governing  savings  banks, 
each  of  which  must  have  a  paid-up  capital  of  $25,000  if  joint 
stock  banks,  or  a  reserve  of  $1,000,000  if  mutual. 

These  banks  may  own  their  own  building  if  the  cost  of 
the  same  does  not  exceed  the  capital  and  surplus. 


Banking  in  California  195 

They  may  also  own  real  estate  taken  for  debt,  but  not 
beyond  ten  years  after  acquiring  title. 

They  cannot  purchase,  own  or  sell  personal  property, 
except  as  may  be  needed  in  their  business,  and  mortgages  on 
real  estate,  bonds,  securities,  bullion,  mint  certificates  and 
evidence  of  debts  issued  by  the  United  States. 

A  list  of  the  bonds  in  which  they  may  invest  embrace 
bonds  of  the  United  States,  of  California,  of  any  other  State 
that  has  not  defaulted  in  principal  or  interest  for  five  years, 
of  any  governmental  subdivision  of  any  State  outside  of 
California,  with  a  population  of  20,000,  issued  pursuant  to 
authority,  provided  such  issues  do  not  exceed  5  per  cent  of 
the  assessed  value  of  the  property  therein,  and  provided 
further  that  there  has  been  no  default  in  interest  for  five 
years;  also  bonds  of  steam  and  street  railways  under  certain 
conditions,  and  bonds  issued  by  real  estate  corporations  that 
are  not  in  excess  of  60  per  cent  of  the  market  value  of  the 
property. 

No  savings  bank  shall  borrow  money,  or  pledge  or  hypoth- 
ecate any  of  its  securities,  except  to  meet  the  immediate  de- 
mands of  its  own  depositors. 

They  may  issue  general  certificates  of  deposit,  transfer- 
able by  endorsement  and  delivery,  and  special  certificates. 

They  may  prescribe  in  their  by-laws  or  contracts  with 
depositors  the  conditions  on  which  repayments  are  to  be  made. 
But  whenever  these  demands  exceed  the  disposable  funds 
on  hand  to  meet  the  same,  no  new  loans  shall  be  made  until 
such  excess  has  ceased. 

No  loan  shall  be  made  without  adequate  security  of  real 
or  personal  property,  nor  for  a  longer  period  than  ten  years. 

Bond  loans  shall  not  exceed  90  per  cent  of  the  market 
value  of  those  rated  as  first  class,  such  as  United  States  and 
State  bonds,  85  per  cent  of  the  market  value  of  the  second 
class,  70  per  cent  of  those  in  the  third  class  and  65  per  cent 
of  the  market  value  of  personal  property  and  stocks  of  cor- 
porations. 


196  Banking  in  California 

Real  estate  loans  must  be  limited  to  60  per  cent  of  the 
market  value  of  the  property. 

Loans  on  mining  shares  are  strictly  prohibited,  and  that 
is  a  good  feature  as  a  rule. 

The  general  law  as  to  loans  on  the  stock  of  other  banks 
is  made  applicable  to  savings  banks. 

Cash  reserves,  or  their  equivalent,  must  be  equal  to  4 
per  cent  of  deposit  liabilities,  one-half  of  which  must  be  in 
lawful  money  in  its  own  keeping. 

Deposits  with  commercial  banks  and  trust  companies, 
on  open  account,  to  facilitate  business,  shall  be  permitted, 
and  shall  not  be  construed  as  loans. 

Not  more  than  5  per  cent  of  the  deposits  of  any  savings 
bank  shall  be  deposited  with  any  one  bank. 

As  Applied  to  Commercial  Banks. 

Article  III  relates  to  commercial  banks,  which  cannot 
make  loans  to  any  person,  company,  corporation  or  firm  in 
excess  of  10  per  cent  of  capital  and  surplus,  provided  that 
such  loans  may  be  made  up  to  25  per  cent  if  the  security 
tendered  be  worth  15  per  cent  in  excess  of  said  loans. 

No  loan  shall  be  made  upon  the  securities  of  one  or  more 
corporations,  the  payment  of  which  is  undertaken  severally, 
but  not  jointly,  by  two  or  more  individuals  or  firms. 

Every  bank  must  have  a  paid-up  capital  of  not  less  than 
$25,000. 

No  commercial  bank  can  loan  to  any  director,  unless  the 
application  be  approved  by  a  two-third  vote  of  the  board 
exclusive  of  the  applicant  member.  Even  then  the  full  details 
of  the  action  must  be  submitted  to  the  approval  of  the  super- 
intendent.    That  being  withheld,  the  transaction  fails. 

It  is  further  stipulated  in  this  connection  that  the  total 
loans  to  all  directors  shall  not  exceed  30  per  cent  of  the  capital 
and  surplus. 

In  reference  to  these  loans  to  directors,  it  is  further  pro- 
vided that  the  loaning  bank  shall  make  a  monthly  report  to 
the   superintendent,   stating   in   writing   the   names    of   the 


Banking  in  California  197 

directors  to  whom  the  loans  have  been  made,  the  amount  and 
rate  of  the  loan,  when  due  and  the  security  pledged  therefor. 
Failure  to  do  this  constitutes  a  felony. 

As  Applied  to  Trust  Companies. 

Article  IV  relates  to  the  specific  duties  and  obligations 
of  the  trust  companies  in  the  State. 

These  companies  must  have  a  paid-up  capital  of  not  less 
than  $200,000  before  they  can  transact  business. 

Reasonable  fees  are  allowed  for  all  and  every  kind  of 
service  rendered,  but  such  compensation  shall  not  exceed 
that  allowed  to  natural  persons  for  like  services. 

It  shall  be  lawful  for  any  public  administrator  to  deposit 
with  any  trust  company  having  the  required  capital  and  doing 
business  in  the  same  city  or  county,  all  moneys  of  any  estate 
upon  which  he  is  administering  not  needed  for  current  ex- 
penses, provided  said  company  has  made  the  requisite  deposit 
with  the  State  Treasurer. 

Whenever  such  deposits  have  been  ordered  or  concurred 
in  by  the  court,  the  administrator  is  relieved  to  that  extent 
of  all  responsibility  for  the  money  so  deposited. 

Before  a  trust  company  can  accept  a  deposit  from  an 
estate  it  must  deposit  $100,000  with  the  State  Treasurer. 

When  a  trust  company  has  an  excess  of  $200,000  of  paid- 
up  capital,  it  may  mortgage  any  improved  productive  real 
estate  which  it  owns  in  excess  of  such  $200,000,  and  may  de- 
posit the  mortgage  with  the  State  treasurer  in  lieu  of  cash 
as  further  security  for  the  deposits  from  estates  at  the  rate 
of  $100,000  for  the  first  additional  $500,000  of  deposits  and 
$50,000  for  each  additional  similar  amount,  but  no  trust  com- 
pany shall  be  required  to  deposit  an  amount  in  excess  of 
$1,000,000. 

In  addition  to  the  usual  report,  the  trust  companies  must 
furnish  the  superintendent  with  a  list  and  brief  description 
of  the  trusts  held,  the  source  of  the  appointment  and  the 
amount  of  real  and  personal  property  held. 


198  Banking  in  California 

Outside  of  the  official  information  required  by  the  super- 
intendent, the  trust  companies  must  protect  the  confidence 
reposed  in  them. 

The  use  of  the  word  **trusf  in  combination  with  or  in 
connection  with  the  word  "company/'  etc.,  is  strictly  for- 
bidden other  than  by  the  trust  companies  provided  for  by 
the  Bank  Act.  Whenever  such  use  is  made  of  the  word  by 
any  other  corporation,  it  will  come  under  the  supervision  of 
the  superintendent  or  be  deemed  guilty  of  a  misdemeanor. 

Duties  of  Bank  Superintendent. 

Article  V  relates  to  the  creation  of  a  State  Banking  De- 
partment, with  a  superintendent  of  banks  as  its  head  and 
chief  officer.  He  is  an  appointment  of  the  Governor  under  a 
four-year  term,  with  a  salary  of  $10,000  per  annum,  and  with 
authority  to  name  his  own  deputy,  attorney,  examiners, 
stenographers  and  clerks  and  to  spend  a  sum  annually  not 
exceeding  $75,000  for  all  salaries  and  supplies,  including  his 
own,  together  with  office  rent,  fuel,  light,  printing,  postage 
and  stationery.  Both  superintendent  and  his  deputy  are 
obliged  to  furnish  bonds  of  $50,000  each. 

The  money  to  meet  these  expenses  is  contributed  by  the 
banks,  which  voluntarily  submit  to  a  pro  rata  tax  on  their 
deposits,  in  addition  to  license  fees  to  make  up  the  sum  total 
required,  limited  for  the  first  year  at  least,  to  $75,000.  This 
money  is  set  apart  as  a  special  fund  for  that  purpose,  and 
any  excess  in  one  year  reduces  the  amount  to  be  collected  in 
the  following  year  to  the  extent  of  that  excess. 

Savings  banks  must  be  examined  once  every  year  and 
all  other  banks  twice.  In  addition  all  banks  must  furnish 
sworn  reports  of  their  condition  three  times  every  year  on 
such  dates  as  may  be  named. 

No  bank  can  transact  business  without  a  permit  from 
the  superintendent  and  a  fee  of  $50.  Every  bank  doing  a 
departmental  business  must  submit  a  separate  report  for  each 
department. 


Banking  in  California  i^^ 

The  items  covered  in  these  reports  represent  the  usual 
classifications.  In  addition  a  condensed  statement  of  these 
reports  must  be  published  at  least  once  in  some  newspaper  of 
general  circulation  published  at  or  near  the  place  of  business. 

Whenever  the  condition  of  a  bank  shows  the  capital  to 
be  impaired,  sixty  days  will  be  allowed  to  make  things  good. 
Refusal  to  comply  with  this  demand,  if  further  delayed  for 
ten  days,  will  be  followed  by  summary  action. 

When  a  bank  is  considered  to  be  in  an  unsound  or  unsafe 
condition,  the  superintendent  has  authority  to  take  immediate 
possession  and  stop  all  business  until  the  bank  can  be  restored 
or  goes  into  liquidation  under  the  direction  of  the  superin- 
tendent. This  feature  is  a  great  improvement  over  that  pre- 
viously in  force.  It  follows  along  the  same  lines  that  have 
been  admirably  observed  by  the  Comptroller  of  the  Currency. 

The  present  superintendent  had  not  been  in  office  six 
months  before  he  was  obliged  to  resort  to  procedures  of  this 
kind.  They  may  appear  a  little  arbitrary  and  perhaps  harsh, 
and  some  may  even  say  uncalled  for,  but  that  is  the  law  in 
the  case,  and  the  superintendent  has  no  alternative.  He  must 
administer  the  law  as  he  understands  it,  or  give  way  to  some 
one  who  will. 

In  the  liquidation  of  banks,  after  the  superintendent  has 
paid  off  all  claims,  provided  the  assets  are  sufficient  for  that 
purpose,  exclusive  of  the  claims  of  stockholders,  and  made 
provision  for  unpaid  deposits  or  dividends,  and  has  met  all 
the  expenses  of  liquidation,  the  superintendent  must  call  a 
meeting  of  the  stockholders,  and  make  a  full  report  of  his 
action,  and  deliver  to  the  stockholders  whatever  property 
may  be  left,  including  records,  and  receive  from  their  hands 
his  discharge. 

This  places  the  organization  just  where  it  was  before  it 
began  business.  If  the  stockholders  wish  to  resume  and  are 
willing  to  comply  with  the  provisions  of  the  Bank  Act  and 
with  the  authority  of  the  superintendent  under  that  act,  they 
will  be  permitted  to  proceed  with  their  determination. 


200  Banking  in  California 

It  is  made  the  duty  of  the  directors  to  perform  some  more 
important  service  than  is  implied  in  an  attendance  upon  the 
regular  meetings.  At  least  once  every  year  they  are  to  make 
a  thorough  examination  of  all  the  books,  papers  and  aiffairs 
of  the  bank,  and  particularly  the  loans  and  discounts,  with 
the  view  of  ascertaining  the  value  and  security  thereof,  and 
of  the  collateral  security,  if  any  given,  in  connection  there- 
with. 

The  information  thus  secured  is  to  be  incorporated  in  a 
report  and  filed  with  the  board,  so  as  to  be  accessible  to  the 
superintendent. 

In  October  every  year  the  superintendent  must  make  a 
detailed  report  of  the  operations  of  his  office  to  the  Governor 
for  submission  at  the  next  session  of  the  legislature. 

In  addition  to  this  annual  report,  the  superintendent  is 
obliged  to  post  in  his  office  weekly  a  full  account  of  his  official 
acts  as  to  changes  and  salaries  of  his  office  force,  applications 
for  permits  to  transact  business,  with  the  granting  or  rejection 
of  such  applications,  and  similar  information. 

If  the  superintendent  has  knowledge  of  the  insolvency  or 
unsafe  condition  of  any  bank,  and  fails  to  proceed  against 
such  bank  in  accordance  with  the  provisions  applicable  to 
such  cases,  he  shall  be  deemed  guilty  of  a  felony. 

All  acts  or  parts  of  acts  in  conflict  with  the  Bank  Act  of 
March  1,  1909,  are  repealed  by  said  act,  and  the  law  of  that 
date  is  the  supreme  law  now  in  force. 

Constitutional  Provisions  for  Banks. 

Under  the  State  constitution,  stockholders  in  banks  are 
personally  liable  for  the  debts  of  the  same  to  the  full  value 
of  their  shares  if  to  pay  such  liabilities  that  course  became 
necessary. 

The  constitution  prohibits  all  corporations  or  associations 
from  issuing  for  circulation  as  money  anything  but  the  lawful 
money  of  the  United  States. 

It  prohibits  the  issuing  of  stock  or  bonds,  except  for 


Banking  in  California  201 

money  paid,  labor  done  or  property  actually  received.  Any 
issue  of  either  not  so  governed  is  declared  void. 

In  electing  for  directors  or  managers  of  corporations  it 
permits  voting  by  proxy  and  cumulative  voting,  except  that 
members  of  co-operative  societies  formed  for  agricultural,  mer- 
cantile and  manufacturing  purposes,  may  vote  on  all  questions 
affecting  societies  in  the  manner  prescribed  by  law. 

The  same  instrument  puts  all  corporations  organized  out- 
side of  the  State  who  wish  to  do  business  in  the  State  under 
the  same  provisions  as  the  law  prescribes  for  State  organiza- 
tions. ' 

Corporations  may  be  sued  in  the  county  where  the  con- 
tract is  made  or  is  to  be  performed. 

An  amendment  to  the  State  constitution,  adopted  in  1902, 
exempts  from  taxation  all  bonds  issued  in  California  by  the 
State  or  any  division  of  the  same. 

Taxation  of  mortgages  was  made  a  part  of  the  constitu- 
tion adopted  in  1879,  and  is  still  in  force,  but  was  recently 
modified  to  the  extent  that  it  is  now  optional  with  the  lender 
or  the  borrower  as  to  which  party  shall  pay,  the  tax.  If  the 
obligation  be  put  upon  the  lender,  he  must  make  the  interest 
rate  sufficiently  large  to  cover  the  tax,  while,  if  the  borrower 
assumes  it,  he  gets  the  lowest  rate  prevailing  at  the  time  the 
loan  is  made. 

The  taxation  of  mortgages  at  their  face  value  and  the 
taxation  of  the  property  upon  which  they  are  a  lien,  after 
the  lien  has  been  deducted,  at  or  about  60  per  cent  of  its 
market  value,  is  not  an  equal  form  of  taxation,  as  any  one 
can  readily  see.  The  object  of  such  taxation  was  to  gratify 
an  unfounded  prejudice  against  the  banks  entertained  by 
the  uninformed,  but  it  has  failed  to  effect  the  harm  intended. 


INDEX 


Page 

Statehood  features  5 

Sound  monetary  standard ...-..•....•  6 

Primitive  metallic  currency 7 

California  gold  and  public  credit .•• .  9 

Trade  dollars — Silver  certificates 10 

Gold  discovery — Gold  seekers 13 

Pioneer  bankers  and  merchants 15 

Express  and  private  banking •• 17 

New  era  in  banking — Bank  center 19 

Pioneer  bank  failures •• 21 

Banking  in  the  interior 22 

An  old  draft  honored 24 

Prominent  pioneer  and  other  country  bankers 25 

Better  methods  of  banking .• 27 

First  incorporated  savings  bank — Ofl&cials 28 

Other  city  savings  banks 32 

Interior  savings  banks.  .• 35 

Value  of  savings  banks 39 

Deposits  of  savings  banks 44 

City  private  banks  of  later  date 46 

First  incorporated  commercial  bank .• 47 

First  trust   company 48 

Advent  new  banking  system , 51 

Large  bank  capital — Big  merger 52 

Eapid    growth — Sudden    collapse • 53 

Two  big  banks  unite 55 

More    national   banks 56 

Private  banks  incorporate 57 

Big  trust   companies.  .• 58 

Some  foreign  banks 61 

Banks  of  brief  existence 62 

Kush  for  bank   privileges 64 

Japanese   banks    ,. .  65 

National  banks  capture  San  Francisco 67 

San  Francisco  bank  statistics 69 

Bank    publicity    legislation ■ , 74 

First   general  bank  statement 75 


11.  INDEX 

Page 

Some  early  interior  banks 76 

Bank  changes  under  Commission 79 

Statistics  all  banks  under  Commission 84 

National  bank  progress  in  California .  86 

Statistics  national  banks • .  96 

Location  of  banks — Amendments  to  system 97 

Conversion  of  State  banks  to  nationals 99 

Statistics  all  banks  in  California 101 

Suspensions   and  liquidations 103 

Bank  run  stopped  by  a  bluff 104 

Big  failure  and  heroic  recovery .-..•.. 105 

Other  bank  failures  and  causes 107 

Features  of  California  savings  banks 113 

Clearing  houses  of  State 118 

Bank  Commission — ^Its  work,  cost,  members 130 

Graded   capital — Branch   banking -.  .• 141 

Bank  changes  in  Los  Angeles 143 

Bank  buildings — Some  features 145 

Fewer  and  stronger  banks .• 151 

The  two  bank  systems 152 

Institute  bank  clerks .• 157 

Interest  rates  in  San  Francisco 158 

U.  S.  Mint— Coinage— Officials— Fire— Aid 161 

U.  S.  Sub-treasury — ^Valuable  aid — Officials 166 

California  Bankers  Association 169 

Eelation  of  banks  to  industries •. 171 

Public  money  in  banks 174 

Protection  for  depositors 177 

Postal   Savings  Banks 178 

Central  Bank — Currency  problem 179 

Small  and  large  capital .• 181 

Significant  bank  mergers 183 

Tenure  of  bank  officials 184 

Safe  deposit  vaults 185 

First  year  under  new  law. .  .• 187 

Eeport  all  California  banks  June  30,  1910 188 

Income  from  savings — ^Illustrations 189 

Summary  Bank  Act  1909 , 190 

Constitutional  provisions  for  banks .« 200 


!!ll 


